Builder's Risk for House Flippers: When a Dwelling Policy Isn't Enough
- 6 days ago
- 6 min read
Buying a fixer-upper is exciting, but it also comes with risks that many investors don't expect. One of the biggest mistakes house flippers make is assuming a standard dwelling policy will protect a property during renovations. In many cases, it won't.
Builder's risk for house flippers is designed to help protect a property while it is being renovated or repaired. Understanding the difference between builder's risk insurance and a dwelling policy can help you avoid expensive coverage gaps and keep your investment on track.
What Is Builder's Risk Insurance?
Builder's risk insurance is a specialized type of property insurance that may protect a building while it is under construction, renovation, or major remodeling.
Unlike insurance designed for occupied homes, builder's risk coverage focuses on buildings that are actively being worked on. Because construction creates additional risks, standard property policies often limit or exclude losses that occur during major renovations.
A builder's risk policy may help cover:
Fire damage
Wind or hail damage
Lightning
Theft of building materials
Vandalism
Certain water damage, depending on the cause
Materials stored on-site or sometimes off-site
Temporary structures used during construction
Coverage varies by policy, carrier, and project, so it's important to review your policy carefully with a licensed insurance agent.
What Is a Dwelling Policy?
A dwelling policy is designed primarily for residential rental properties, vacant homes, or other residential structures that are not owner-occupied.
Many real estate investors purchase dwelling insurance because it provides property protection while a home is vacant or rented. However, once significant remodeling begins, the risks change.
Depending on the policy, major renovations may reduce coverage or require the insurer to be notified. Some policies exclude certain losses that occur during construction activities.
That's why relying only on a dwelling policy can create unexpected gaps.
When Isn't a Dwelling Policy Enough?
The short answer is simple:
A dwelling policy often isn't enough when substantial renovations, structural repairs, or contractor work are taking place because it may not be designed for construction-related risks.
If you're replacing kitchens, removing walls, rebuilding roofs, updating electrical systems, or making other major improvements, builder's risk insurance is often the better fit.
Every policy is different, so speak with a licensed insurance professional before work begins.
Why Renovation Projects Create Different Risks
Renovation sites are very different from occupied homes.
Workers come and go throughout the day. Expensive tools and materials may sit on-site overnight. Portions of the structure may be exposed to weather while work is underway.
Common risks include:
Theft of lumber, copper, windows, or appliances
Vandalism
Storm damage before the building is sealed
Fire caused by electrical work
Accidental damage during construction
Damage to materials waiting to be installed
These exposures often require insurance specifically designed for construction projects.
Who Needs Builder's Risk Insurance?
Builder's risk insurance can benefit many types of professionals, including:
House flippers
Real estate investors
General contractors
Property developers
Custom home builders
Renovation contractors
Property owners managing major remodels
If the project involves significant construction work, builder's risk insurance is often worth discussing with your insurance advisor.
What Does Builder's Risk Insurance Typically Cover?
While every policy is different, builder's risk insurance commonly includes protection for:
The Building
The structure itself may be covered while renovations are in progress.
Building Materials
Coverage may include materials that have been delivered and are waiting to be installed.
Fixtures and Equipment
Cabinets, flooring, plumbing fixtures, HVAC equipment, windows, and similar items may qualify for coverage depending on the policy.
Temporary Structures
Some policies may include temporary fencing, storage containers, or construction offices.
Debris Removal
If a covered loss occurs, debris removal expenses may also be included, subject to policy limits.
Always review exclusions, deductibles, and endorsements before purchasing coverage.
What Builder's Risk Insurance May Not Cover
Like every insurance policy, builder's risk has exclusions.
Common exclusions may include:
Employee theft
Poor workmanship
Normal wear and tear
Mechanical breakdown
Flood damage (unless added)
Earthquake damage (unless added)
Intentional acts
Additional endorsements may be available depending on the project and location.
How Long Does Builder's Risk Coverage Last?
Builder's risk insurance is generally temporary.
Policies often remain in effect until one of the following happens:
Construction is completed
The property becomes occupied
The policy expires
The project is sold
Some policies can be extended if renovations take longer than expected.
Can House Flippers Have Both Policies?
Yes.
Many experienced investors transition between different policies during a property's lifecycle.
For example:
Purchase a vacant property
Begin renovations with builder's risk coverage
Complete construction
Transition to landlord insurance or homeowners insurance if appropriate
Sell the finished property
The correct approach depends on how the property will be used after renovations.
Other Insurance House Flippers Should Consider
Builder's risk insurance is only one piece of a complete insurance plan.
Depending on your business, you may also need:
General liability insurance to help protect against third-party bodily injury or property damage claims.
Commercial property insurance for offices or storage facilities.
Commercial auto insurance for business vehicles.
Workers' compensation insurance if required in your state or if you have employees.
Contractors equipment insurance for tools and equipment.
Umbrella insurance for additional liability protection.
A licensed insurance agent can help determine which coverages fit your project.
How Builder's Risk Insurance Costs Are Determined
There is no standard price for builder's risk insurance.
Costs vary widely based on factors such as:
Property value
Renovation budget
Construction timeline
Building location
Type of work performed
Security measures
Claims history
Policy limits
Deductible selected
Rather than looking only for the lowest premium, focus on finding coverage that matches the risks of your project.
Tips for Reducing Construction Risks
Insurance is important, but reducing losses before they happen is even better.
Consider these best practices:
Secure the property with quality locks and fencing.
Store valuable materials safely.
Install temporary lighting if appropriate.
Keep accurate renovation records.
Work with licensed contractors.
Inspect the property regularly.
Notify your insurance agent before major project changes.
These steps may reduce the likelihood of costly setbacks and can help keep projects moving forward.
For additional construction safety guidance, review resources from the Occupational Safety and Health Administration (OSHA): https://www.osha.gov.
You can also learn more about property insurance basics through the National Association of Insurance Commissioners (NAIC): https://content.naic.org.
Why House Flippers Choose Wexford Insurance
House flipping combines real estate investing with construction risk, creating insurance needs that are different from traditional homeowners or landlords.
At Wexford Insurance, we specialize in commercial insurance solutions for contractors, investors, and service businesses. Our team takes time to understand each project before recommending coverage options.
Instead of offering generic policies, we help clients:
Review renovation risks
Identify potential coverage gaps
Coordinate multiple insurance policies
Understand certificates of insurance
Adjust coverage as projects change
Our goal is to help clients make informed decisions based on their specific operations and risk profile.
Frequently Asked Questions
Is builder's risk insurance required for house flipping?
Requirements vary depending on lenders, contracts, and individual projects. While it may not always be legally required, many investors and lenders choose it because of the protection it may provide during construction.
Can I renovate a property with only a dwelling policy?
Possibly, but many dwelling policies have limitations regarding major renovations. Always review your policy with your insurance company or licensed agent before construction begins.
Does builder's risk insurance cover theft?
Many builder's risk policies may cover theft of covered building materials, subject to policy terms, conditions, exclusions, and deductibles. Coverage varies by insurer.
Does builder's risk insurance include liability coverage?
Builder's risk insurance primarily protects property. Liability coverage is usually provided through a separate general liability policy.
When should I buy builder's risk insurance?
Coverage is typically purchased before construction or renovation work begins to help protect the project from the start.
Protect Your Next Flip with the Right Coverage
Every renovation project is different, and the insurance you need depends on the property, the work being performed, and your business goals. Before you start your next flip, talk with a licensed insurance professional who understands construction and real estate investing.
Wexford Insurance can help you review your risks, explain your coverage options, and provide a free, no-obligation quote so you can move forward with greater confidence.
