A couple of weeks ago, I wrote about insurance for fixer uppers and homes being remodeled and mentioned vacant remodel and builders risk insurance (see https://wiseinsurancegroup.com/home-insurance-remodels-fixer-uppers/). I touched on a couple of their differences but wanted to dive a little deeper into how they are alike, how they are different, and when one may be a better fit than the other.
Both builders risk insurance and vacant remodel policies are designed to cover the value of the existing home while it’s being remodeled, as well as the increased value when renovations are complete. Additional similarities include:
- They provide coverage for common perils such as damage from fire, lightning strike, water, etc.
- The cover the vacant home during the remodel process and replaced with a home insurance policy when the project’s complete.
- Personal liability and medical coverage are usually included.
- Neither covers damage or theft of tools.
- Both can be written to last up to a year or for a shorter term such as 90 days or 6 months.
Vacant remodel and builders risk insurance policies also have their differences which help me determine which one to recommend to a prospective client. These include:
- Most vacant remodel policies do not provide coverage if structural changes will be made to the home while many builders risk policies will cover them (Note, underwriters will require documentation from a structural engineer before quoting). Structural changes include moving or removing walls, adding a story or wing, etc.
- Builders risk policies may provide optional coverage for materials, appliances, fixtures, etc. while in transit or stored on-site.
- Builders risk policies can be written for ground up or all new construction while vacant remodel policies are designed for remodeling of an existing home.
Based on the strengths and differences of these policy types, I usually recommend vacant remodel policies when the following circumstances are present:
- The remodel project will be completed in 30 days to 6 months.
- The project involves a cosmetic remodel to an existing home.
Conversely, I believe builders risk insurance provides a better fit when:
- For projects lasting 6 months or longer.
- Projects involving structural changes.
- Ground up construction whether an all new home on a lot or when tearing down an existing home and building an all new home.
- When coverage for materials, appliances, and fixtures is needed.
Pricing can be comparable between a vacant remodel and builders risk policy or significantly different. This is why I review both types when quoting a prospective client’s project. What do you think? Share your thoughts, questions, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!
