Private Client Series: Insuring Custom Builds & Renovations

How Do I Properly Insure My Custom Build or Major Home Renovation?

Building a custom home or undertaking a significant renovation in Connecticut is more than a financial investment; it is the realization of a personal vision. Whether you are constructing a coastal estate in Greenwich or restoring a historic manor in West Hartford, the process involves unique risks that standard insurance policies are not designed to handle.

Many homeowners assume their existing homeowners insurance policy will automatically extend to cover a construction project. This is a dangerous misconception. Standard policies often contain exclusions for "dwellings under construction" or limit coverage for materials not yet installed. Without the right protection, a fire, theft of high-end materials, or a structural collapse during the build could result in a total financial loss.

As part of our Private Client Series, this guide explores how to protect your custom project from the first shovel in the ground to the day you move in.

Why Your Current Policy Might Not Be Enough

A standard homeowners policy is designed for a completed, occupied home. When you begin a major renovation or a ground-up build, your risk profile changes entirely.

Standard policies generally fail in three key areas during construction:

1. Theft of Materials: If you have $50,000 worth of Italian marble or custom cabinetry sitting in a crate on your lawn, a standard policy may not cover it if it is stolen before being permanently installed.

2. Liability Gaps: Your personal liability coverage may not account for the high number of contractors, subcontractors, and delivery personnel walking your property daily.

3. Vacancy Exclusions: If you move out of your home during a six-month renovation, your home may be considered "vacant" or "unoccupied." Most policies trigger exclusions after 30 or 60 days of vacancy, potentially voiding your coverage for claims like burst pipes or vandalism.

For these reasons, most major projects require a specialized form of protection known as Builder’s Risk Insurance.

What Is Builder’s Risk Insurance and Why Do You Need It?

Builder’s Risk insurance is a specialized property insurance policy that covers a building under construction. For Private Clients, this coverage is essential because it protects the specific value of the work-in-progress, the materials on-site, and even materials in transit to the site.

What is Covered?

• The Structure: Protection against fire, wind, lightning, and explosion for the new build or the portion of the home being renovated.

• Materials and Supplies: Coverage for everything from lumber and copper wiring to custom-ordered fixtures and high-end flooring stored on the premises.

• Equipment Breakdown: Protection for expensive HVAC systems or smart-home servers if they are damaged during installation.

• Soft Costs: This is a critical addition for high-value projects. Soft costs cover financial losses that aren't physical damage, such as additional interest on construction loans, real estate taxes, and architectural fees incurred because a covered loss delayed the project.

The "Private Client" Distinction

Standard builder's risk policies may have low limits. For a custom build, you need a policy that understands "Replacement Cost" for bespoke materials. If your project uses reclaimed 18th-century wood or imported stone, the insurance must reflect the actual cost to source and replace those items, not just the cost of "standard" materials.

How Much Does Insuring a Custom Build Cost?

One of the most common questions we receive at Insure Connecticut LLC is about the cost. While every project is unique, several factors influence the premium of a Builder’s Risk policy:

• Total Project Value: This includes the cost of labor and materials, not the value of the land itself.

• Project Duration: Policies are typically written for 6, 9, or 12 months. Shorter projects generally cost less, but you must ensure the policy can be extended if construction is delayed.

• Construction Type: A timber-frame home may carry a higher premium than a steel-and-concrete structure due to fire risk.

• Location: Proximity to the coast or a fire department will impact the rate.

Generally, you can expect to pay between 1% and 3% of the total construction cost for a comprehensive Builder’s Risk policy. While this adds to your budget, it is a fraction of the cost of rebuilding out of pocket after an uninsured disaster.

Addressing Problems and Fears: The Contractor Dilemma

A common fear among homeowners is being held liable for an injury that happens on their property. You might ask, "Isn't my contractor responsible for insurance?"

The answer is yes: but only to a point. You must verify that your general contractor carries:

1. General Liability Insurance: This covers damage they cause to your property or injuries to third parties.

2. Workers' Compensation: This is vital. If a worker is injured on your property and the contractor does not have Workers’ Comp, the worker could potentially sue you for damages.

The Pro Tip: Never take a contractor’s word for it. Request a "Certificate of Insurance" (COI) and have it reviewed by your insurance broker. Furthermore, ensure you are named as an "Additional Insured" on their policy. This provides you with a direct line of defense under their coverage.

After the Build: Updating to High-Value Home Insurance

Once the final nail is driven and the Certificate of Occupancy is issued, the Builder’s Risk policy ends. This is the moment to transition to a High-Value Home Insurance policy.

If you have added 2,000 square feet or installed a professional-grade chef's kitchen, your old replacement cost is no longer accurate. You need a policy that offers:

• Guaranteed Replacement Cost: This ensures that even if rebuilding costs spike after a disaster, the insurance company will pay to rebuild your home exactly as it was, regardless of the policy limit.

• Sewer and Drain Back-up: Critical for homes with finished basements or high-end mechanical systems.

• Ordinance and Law Coverage: If local building codes have changed since your renovation, this covers the extra cost of bringing the home up to current standards during a rebuild.

For properties that are not your primary residence, you may also need to consider landlord insurance or dwelling fire insurance depending on the intended use.

Actionable Tips for Homeowners Planning a Project

1. Notify Your Agent Early: Call your insurance broker before you sign the construction contract. We can help you identify gaps in the contractor's insurance and set up your own protection.

2. Document Everything: Take photos of the construction progress weekly. If a claim occurs, having a visual record of the high-end materials installed behind the walls (like soundproofing or specialized wiring) is invaluable.

3. Secure the Site: Insurance companies often provide better rates for sites with fenced perimeters, lighting, and security cameras. Theft of copper and tools is a major risk in the industry.

4. Review Liability Limits: Consider an umbrella policy to provide an extra layer of protection while your property is a high-traffic construction zone.

Frequently Asked Questions

Does my homeowners insurance cover renovations?

Minor cosmetic changes (like painting or new carpet) are usually fine, but major structural changes or projects costing more than a certain percentage of your home's value (often 10%) usually require a policy endorsement or a separate Builder’s Risk policy.

What happens if the project is delayed?

Most Builder's Risk policies can be extended, but you must notify your agent before the policy expires. If the policy lapses and a fire occurs, you will have no coverage.

Who should buy the Builder’s Risk policy: me or the contractor?

While the contractor can buy it, we generally recommend the homeowner (the property owner) purchase the policy. This ensures that you control the coverage and that the claim check comes to you in the event of a loss.

Are my belongings covered if they are in a storage unit during renovation?

Most standard personal lines insurance policies provide limited coverage for property off-premises, but you should verify this. If you are moving high-value art or wine, you may need a specific rider.

Conclusion

Building or renovating a custom home is a complex endeavor with high stakes. By treating insurance as a foundational part of the construction process: rather than an afterthought: you protect your vision and your financial future.

At Insure Connecticut LLC, we specialize in the unique needs of Connecticut’s Private Clients. Whether you are navigating the nuances of a new build or ensuring your contractor’s liability is up to par, we are here to provide clear, expert guidance.

Is your renovation project properly protected? Contact Insure Connecticut LLC today for a comprehensive coverage review of your custom build or renovation plans.