Renovating Your Home? Don’t Overlook These Critical Insurance Risks

5 Coverage Gaps That Could Cost You

1. Your Policy May Not Cover New Construction or Upgrades  

Most homeowners assume their insurance automatically covers renovations. It doesn't, at least not fully. If your project significantly increases your home's value, adds square footage, or involves structural changes, you may be underinsured the moment construction starts.

What to do:

• Call your insurance advisor before work begins, not after.
• Update your policy to reflect additions or upgrades.
• Ask about a builder's risk policy for major or structural projects. This is specifically designed for homes under construction and covers risks your standard policy won't.

2. Uninsured Contractors = Massive Liability for You

Here's a scenario that plays out more often than you'd think: a contractor gets injured on your property, has no workers' compensation insurance, and suddenly you're facing a lawsuit. A single workers' comp claim can easily run into six figures, and without the right coverage, that bill lands on you.

What to do:

• Always ask for certificates of insurance and check the expiration dates.
• Confirm your contractor carries both general liability and workers' compensation.
• Avoid cash payments or under-the-table labor arrangements, which can void your protections entirely.

3. Don't Forget About the Subcontractors

Your general contractor brings in an electrician. The electrician brings in a helper. That helper slips on a wet floor. Who's liable?

Subcontractor injuries are a gray zone that homeowners' policies often don't cover, and most homeowners never think to ask.

What to do:

• Request a full list of subcontractors from your primary contractor.
• Confirm that each one is insured, or that your general contractor is contractually liable for them.
• Consider increasing your personal liability limits or adding an umbrella policy for the duration of the project.

4. Damage During Construction Isn't Always Covered

A contractor nicks a pipe and floods your basement. A power tool sparks a small fire. Your instinct is to file a claim, but depending on the cause and your policy language, you may get a denial.

What to do:

• Ask your agent specifically about "open peril" coverage or construction endorsements.
• Document everything with photos and video before work starts.
• Move valuables and irreplaceable items out of the construction zone.

5. Unpermitted Work Can Void a Future Claim, Even Years Later

Skipped permits and unlicensed contractors aren't just a code violation headache. They can follow you long after the project wraps. If work that wasn't properly permitted later causes damage or leads to a claim, your insurer may have grounds to deny coverage. And when you go to sell, it becomes your buyer's problem too.

What to do:

• Make sure all required permits are pulled before work begins.
• Verify your contractor's license through your city or state licensing board.
• Don't sign off on completed work until inspections are passed.