Builder's Risk Insurance

Last updated: October 14, 2026

Builder's risk insurance protects a property, and the materials going into it, while the property is being renovated or built. For an investor working on a single-family house, a duplex or a fourplex, that is the riskiest stretch of the deal. The house is usually empty. Walls, roofs and plumbing are open. Cabinets, appliances and copper sit on site. Contractors come and go with torches and space heaters. And your lender's collateral is only partly finished.

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This guide covers builder's risk for residential investors: house flips, BRRRR rehabs, value-add work on 2 to 4 unit properties, and ground-up or infill builds of 1 to 4 units. It shows which policy fits which project, what is covered and what is not, how to set the limit, when coverage ends, what your lender requires, and how to keep a claim from being cut or denied.

Key takeaways

• Builder's risk is temporary property coverage for the rehab or build. It usually excludes liability, so most investors buy a fix and flip policy that bundles property, vacancy and liability coverage.
• Match the policy to the project. A light cosmetic rehab, a gut rehab, a partly tenanted fourplex and a ground-up build each call for different coverage.
• Vacancy is the hidden threat. Standard policies cut coverage after 60 days of vacancy, and a renovation does not always count as "construction."
• Insure to the right value. Underinsuring reduces every claim payment, not only total losses.
• Theft of uninstalled appliances and materials is a common claim and a common exclusion. Confirm that coverage in writing.
• Coverage ends on its own at a sale, at occupancy or soon after completion. Line up the next policy first.
• Flood is excluded. In a flood zone, buy flood coverage at loan closing to skip the 30-day waiting period.

What builder's risk insurance is

Chase describes builder's risk insurance, also called course of construction insurance, as property insurance that protects buildings under construction or renovation, along with materials and equipment, from risks like fire, theft and certain weather events. It is temporary. It exists for one project and ends when that project ends.

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Most builder's risk policies are written on an all-risk basis, which means they cover any cause of loss the policy does not specifically exclude, and many cover materials in transit and in off-site storage as well as on site, according to IRMI. IRMI also notes that there is no single standard builder's risk form. Two policies with the same name can respond very differently to the same loss, so the policy wording matters more here than almost anywhere else in your insurance program.

Residential investors usually buy builder's risk in one of two ways:

• A standalone builder's risk policy insures the house and materials during the work. It does not cover workplace injuries or liability (US Assure).
• A fix and flip policy, also called renovation insurance, typically combines property coverage, builder's risk features, a vacant property endorsement and general liability, with optional ordinance or law and loss of rents (OfferMarket).

Why a homeowners policy does not fit a rehab

A homeowners policy is built for an owner living in a finished home. US Assure's guide to builder's risk for homeowners states that homeowners insurance generally does not cover renovations, and that a typical homeowners policy may cap debris removal at about 5 percent of dwelling coverage. On an investment property the mismatch is worse: carriers can deny claims when a tenant lives in a home insured as owner-occupied (OfferMarket). And as Chase points out, a standard homeowners policy may not cover a home that has sat uninhabited for a couple of months, while builder's risk can cover a vacant property undergoing significant renovation.

Why the rehab phase is so risky

Claims data shows where projects get hurt. ISO data reported by Independent Agent magazine found that water damage was the most frequent cause of construction-phase losses, at nearly 28 percent of claims, followed by theft at about 23 percent and fire at 8 percent. Fire was the most severe.

Empty houses burn more often than most investors expect. The U.S. Fire Administration's report on vacant residential building fires estimated about 23,800 of these fires per year from 2013 to 2015, or 6 percent of all residential building fires. Intentional acts were the leading cause at 34 percent, fires peaked between 10 p.m. and 3 a.m., and about 10 percent spread beyond the building where they started.

The financial margin for error is thin. ATTOM's Q2 2026 home flipping report counted 77,991 flips, or 6.2 percent of all home sales, with a typical gross profit margin of 21.5 percent before rehab costs and a typical holding period of 161 days. ATTOM adds that experienced flippers estimate rehab costs at 20 to 33 percent of after-repair value. With that little cushion, one uninsured fire, burst pipe or theft can wipe out the profit on a project.

Which policy fits your project

The most common insurance mistake on a residential rehab is buying the wrong kind of policy for the work. Three things change the answer: the size of the scope, whether anyone lives in the building, and whether you are renovating or building new.

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Light cosmetic rehab on a vacant house. Paint, flooring, fixtures and similar work may fit a vacant dwelling policy that allows renovation, or a fix and flip policy with a vacancy endorsement. Watch the renovation size limits. One vacant structure program accepts homes under repair or renovation only when the work is 19 percent or less of the total completed value or purchase price, and it does not include wind coverage as standard (US Assure). A missing wind peril can conflict with your lender's requirements.

Substantial or structural rehab. Roof replacement, new systems, moved walls and additions call for coverage built for construction risk. One major residential remodeling program sorts projects into basic remodels (fixtures, cabinets, flooring), minor structural remodels (doors, windows, roof replacement, ground-floor additions) and major structural remodels (load-bearing walls, foundations, added stories), and it requires the renovation to represent at least 20 percent of the existing structure's value (US Assure). Historic homes are ineligible in that program.

Gut rehab. A full gut is still classified as remodeling, not new construction, because a structure existed when the project began (US Assure). That classification affects how the existing house is insured.

Rehab with tenants in some units. On a duplex, triplex or fourplex, some remodeling programs allow coverage while less than 50 percent of the units are leased (US Assure). A fix and flip policy may not cover active tenants, in which case you need a landlord policy or a hybrid policy that accommodates occupancy (OfferMarket).

Ground-up or infill build. New one-to-four-family homes, custom homes and modular homes fit builder's risk new construction coverage, and house flippers are among the eligible buyers (US Assure). Add general liability separately.

The finished rental. Once the property is rehabbed and rented, you generally no longer need builder's risk (OfferMarket). A landlord policy on a dwelling fire special form (DP-3) is the standard fit. A DP-1 covers a short list of named perils, usually at actual cash value, while a DP-3 covers the dwelling on an open perils basis at replacement cost (Bluefield Group). Lenders that accept dwelling fire forms typically require the special form (OfferMarket).

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Terms you will see on a quote

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Completed value. The expected value of the finished project. Builder's risk limits are usually set on this number from day one (IRMI).

Existing structure coverage. Coverage for the house you bought, as opposed to the new work. Some renovation programs let you insure the renovation value only or include the existing structure (US Assure).

Named insured and additional insured. The named insured owns the policy, usually the LLC or person on title. An additional insured is added to someone else's policy, such as your lender on your liability policy or you on your contractor's.

Mortgagee clause and ISAOA/ATIMA. The mortgagee clause protects your lender's financial interest in the property. ISAOA means "its successors and/or assigns," which lets the lender's rights transfer if the loan is sold, and ATIMA means "as their interests may appear" (Chase).

Replacement cost and actual cash value. Replacement cost pays to repair or rebuild without deducting depreciation. Actual cash value subtracts depreciation (Oklahoma Insurance Department).

The 80 percent rule. On many residential policies, insuring the dwelling for at least 80 percent of its replacement cost is the condition for being paid on a replacement cost basis (New York Department of Financial Services).

Vacancy permit. An endorsement that restores coverage a vacancy clause would otherwise take away (Adjusters International).

Loss of rents and soft costs. Loss of rents replaces rental income lost to a covered loss. Soft costs are the other financial costs of a delay, such as extra loan interest and property taxes.

Ensuing loss. Damage that results from an excluded cause. A policy may exclude faulty workmanship but cover the water damage a bad plumbing joint causes (The Hartford).

What builder's risk covers on a 1 to 4 unit project

Coverage depends on the policy form, so treat this section as a list of things to confirm rather than a promise of what any one policy includes.

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The house and the work

On a renovation, two values are at risk: the house you bought and the work you are adding. Builder's risk policies do not always insure both, and some residential remodeling programs let you insure the renovation value only or add the existing structure (US Assure). For an investor, the loss that matters most is a fire that takes the whole house, not only the new kitchen. Confirm in writing that the existing structure is insured from the day you close, on the renovation policy or on a companion policy.

Materials on site, in storage and in transit

Building materials are often the easiest thing to lose. One residential remodeling program covers theft of building materials and vandalism for materials stored at the home or in transit to it (US Assure). OfferMarket's renovation coverage insures the structure, materials and equipment on the premises or within 100 feet, and the foundation (OfferMarket). Location rules have real consequences. Tile staged at your contractor's shop across town, or appliances parked at another rental you own, may sit outside a site-only policy.

The causes of loss

Residential builder's risk commonly covers fire and lightning, wind and hail, theft, vandalism, arson and collapse. New construction programs often add materials in transit and at temporary locations, sewer or drain backup, debris removal, fire department service charges, ordinance or law, pollution cleanup and scaffolding (US Assure). These extras usually carry their own smaller limits, so ask for the sublimit on each one, especially debris removal after a fire on a gut rehab.

Theft: the claim investors misunderstand most

Theft is the second most frequent construction claim in the ISO data (Independent Agent), and residential job sites have predictable targets. A BUILDER magazine survey of home builders, published in 2008, ranked copper wiring and pipe, lumber, appliances, air-conditioning units, power tools and windows as the most stolen items (BUILDER).

The fine print matters. Victor Insurance describes a claim where the policy excluded theft of building materials not attached to the structure. Appliances waiting for installation were stolen from an unlocked garage after no one checked the site over a weekend, and the claim fell into that gap.

Before materials arrive, ask three questions. Is theft of uninstalled materials and appliances covered on site, in storage and in transit? Is there a sublimit? What security conditions apply? Then schedule appliance and fixture deliveries as close to installation as your contractor allows.

Loss of rents and soft costs

If the property will be rented, or you are working on a 2 to 4 unit property with tenants already in place, loss of rents coverage replaces rental income lost to a covered loss. OfferMarket notes it matters most for BRRRR investors and multi-unit properties (OfferMarket).

Soft costs are the other price of a delay, and some builder's risk programs offer soft cost coverage as an optional endorsement (US Assure). Picture a kitchen fire in month three of a flip planned around ATTOM's 161-day typical holding period. The policy pays to rebuild the kitchen, but if the repair adds two months, interest, taxes and utilities keep running. On a leveraged flip, that carry can erase the profit even when the repair is fully covered.

Ordinance or law for older homes

When a damaged older home is rebuilt, the city can require it to meet current code. Ordinance or law coverage helps pay for meeting new building codes when rebuilding (Oklahoma Insurance Department). IRMI breaks it into three parts: the value of an undamaged portion that code forces you to tear down, the cost to demolish it, and the increased cost to rebuild to code. The older the housing stock, the bigger this exposure. Our insurance team typically requests ordinance or law at 25 percent on fix and flip quotes.

What builder's risk does not cover

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Flood and earthquake. One major residential remodeling program lists flooding and earthquakes among its standard exclusions, along with pests, terrorism or war, and normal wear and tear (US Assure). In a flood zone, buy a separate flood policy and time the purchase correctly, as explained in the location section below.

Wear and tear, rust, pests and mechanical breakdown. Termite damage, old plumbing that finally fails and worn-out systems are maintenance problems, not insurance claims (Chase).

Faulty workmanship and defective materials. Builder's risk is not a warranty. Policies generally exclude the cost to correct faulty work, though a policy with an ensuing loss provision may cover resulting damage to other property (The Hartford). The badly soldered joint is your contractor's problem. The soaked drywall below it may be covered.

Employee theft and worker injuries. Theft by the crew and injuries to workers are excluded (Chase). Workers belong under the contractor's workers' compensation.

Contractors' tools and equipment. Builder's risk generally does not cover the construction company's tools and equipment (NerdWallet). OfferMarket policies can add optional coverage for tools or rented machinery stolen or damaged on site (OfferMarket).

Liability. A standalone builder's risk policy does not cover injuries to other people (US Assure). The liability section below explains how to fill this gap.

Land and landscaping. Land, trees, shrubs and walkways are generally not covered (NerdWallet).

One more gap is a belief rather than an exclusion. Victor Insurance describes a contractor who skipped builder's risk because he assumed his general liability policy would cover damage to the project. It did not. Liability insurance covers what you owe other people. Builder's risk covers the project itself. A rehab needs both.

Vacancy: the empty-house problem

Most flips start with a vacant house, and standard policies often exclude or void coverage on unoccupied homes (OfferMarket). More investor claims go wrong here than anywhere else.

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How vacancy clauses work on residential policies

In the standard homeowners form, coverage for glass breakage and vandalism ends once the dwelling has been vacant for more than 60 consecutive days. Dwelling policies work much the same way, generally excluding vandalism when the property has been vacant for more than 60 consecutive days before the loss, and some older forms use 30 days (PropertyCasualty360).

Why "under renovation" may not protect you

Many policies say a home under construction is not considered vacant. Renovation can be treated differently. A review in PropertyCasualty360 explains that gutting or remodeling a home, with the contents removed and the occupants gone, can make it vacant, and that visiting to check on progress does not change that.

Courts look for real, ongoing work. A Merlin Law Group review of case law advises owners to show substantial, continuous construction or renovation activity, measured by evidence such as how many workers were on the project and how much time they spent in the building. Sporadic entry is not enough. Timing matters too. One court held that a building was not "in the course of construction" when renovation was planned but had not started, while another counted preparatory work such as removing a furnace and disconnecting utilities (PropertyCasualty360).

Even builder's risk can tighten when work stops. One major program limits losses to named perils if there has been no construction activity for 60 consecutive days before a loss (US Assure).

How rehabs drift into vacancy

The trap is rarely a decision to abandon a project. It is ordinary dead time: waiting on permits, a draw, a missing contractor, a winter or a buyer. Each pause can push a house past a vacancy threshold while no one watches the calendar.

The fix

Disclose vacancy when you apply, and make sure the policy carries a vacant property endorsement or vacancy permit for the whole rehab period. A vacancy permit suspends the vacancy exclusions for the permitted period, though some insurers carve specific perils out of it (Adjusters International). OfferMarket's lending guidelines require borrowers to notify the carrier when a property becomes vacant or unoccupied and to obtain a vacancy permit for the entire vacancy period (OfferMarket).

Back the endorsement with records: a dated work log, contractor invoices, inspection reports and weekly photos. If a claim ever turns on whether the house was "under renovation," that file is your evidence.

Frozen pipes

The standard homeowners form excludes damage from plumbing leaks caused by freezing unless you used reasonable care to maintain heat, or shut off the water supply and drained the system. Some carrier forms apply the freezing exclusion specifically while a dwelling is vacant, unoccupied or being constructed (Property Insurance Coverage Law). On a winter rehab in Chicago, Detroit or Minneapolis, that becomes a simple rule: keep the heat on and check it, or shut off the water and drain the lines, and document which one you did.

Fire, late nights and attached homes

The USFA's vacant residential fire data carries two lessons for rehab investors. Intentional fires lead and most fires happen late at night, so lighting, locked openings and regular site checks matter. And about 10 percent of these fires spread beyond the building where they started. In rowhome and twin markets, a fire in your vacant unit can become a claim from the neighbors.

That risk is concrete in Baltimore, where OfferMarket Capital is based. The city still counted 11,839 properties with Vacant Building Notices at an April 2026 Reinvest Baltimore committee meeting (Maryland DHCD). An investor buying a vacant rowhome may be buying a property that has sat empty for years. Disclose that history, start work promptly after closing, and bind a policy written for a vacant renovation from day one.

Liability on a rehab

Builder's risk does not cover workplace injuries or liability (US Assure), and one residential remodeling program points owners to a separate premises liability policy. On an investor rehab, the liability exposure often outweighs the property exposure.

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Who can get hurt. Contractors and their crews, inspectors, appraisers, buyers' agents, neighbors and trespassers.

Children and open job sites. Under the attractive nuisance doctrine, landowners may owe trespassing children a heightened duty when a dangerous condition is likely to attract them, and must take reasonable steps to eliminate the danger or otherwise protect them (Cornell Legal Information Institute). Open foundations, unsecured stairs and debris piles are exactly that kind of condition. Fence and lock the site.

What lenders require. Fix and flip lenders commonly require general liability of $1,000,000 per occurrence and $2,000,000 aggregate on an occurrence basis, with the lender as additional insured (OfferMarket). An occurrence policy responds to injuries that happen during the policy period even when the lawsuit arrives after the policy ends, which suits short projects.

Your contractors' coverage. Collect certificates of general liability and workers' compensation before work begins. A certificate is information only and does not change the underlying policy (ACORD), so ask your contractor to add you as an additional insured by endorsement. On new construction, US Assure also advises stating a waiver of subrogation in the construction contract to protect the additional named insureds if property damage occurs (US Assure). If a contractor carries no workers' compensation, an injured worker has fewer places to turn and the owner can become the target, so talk with your agent and attorney before hiring anyone who cannot show coverage.

Who buys the policy when a contractor runs the job. Either party can. The construction contract should say who buys it, and the other party is often added as an additional insured (NerdWallet). Victor describes a policy written in the owner's name that left out the builder and subcontractors (Victor Insurance). Settle it in writing before work starts.

How much builder's risk insurance costs

Rules of thumb put builder's risk at roughly 1 to 4 percent of construction cost (Wikipedia), and one agency cited by NerdWallet puts it at 1 to 5 percent of the construction budget. For 1 to 4 unit investors, OfferMarket publishes these sample annual premium ranges for fix and flip policies:

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Source: OfferMarket fix and flip insurance example rates. Your premium depends on location, scope, limits and deductible.

What drives the premium

Location. Often the biggest rating factor, including distance to fire protection, flood zones and coastal or wind-prone exposure (US Assure).

Scope. Remodels of existing houses can cost more to insure than simple installations, especially when the work is structural.

Construction type. Wood-frame homes rate less favorably than fire-resistive construction because a fire can more easily cause a total loss.

Value, limits and timeline. Higher limits and longer projects raise the premium (NerdWallet).

Deductible. A higher deductible lowers the premium, but lenders cap it. OfferMarket's fix and flip guidelines set a $5,000 property deductible (OfferMarket).

Optional coverages. Flood, earthquake, soft costs and change order endorsements add premium (US Assure).

Carrier type. Some vacant and renovation policies are written by non-admitted (surplus lines) carriers, which often add policy fees and surplus lines taxes. Surplus lines policies are not protected by state guaranty funds, although the NAIC reports a historically low insolvency rate for these insurers (NAIC).

Why quotes for the same house vary so much

OfferMarket's insurance and lending teams review hundreds of fix and flip policies each year. They report premiums rising more than 25 percent over an 18-month period, and they estimate that the typical fix and flip policy is quoted nearly 33 percent higher than lender guidelines and investor preferences require, often because the agency does not specialize in investor property or can quote only one carrier (OfferMarket).

Refunds when the project ends early

OfferMarket fix and flip premiums are generally refunded pro rata when you cancel early, most often after a sale or after refinancing into a DSCR loan and switching to landlord insurance. Not every builder's risk policy works that way. In one major program, residential builder's risk for new construction is fully earned, meaning no refund for unused time. Ask before you bind.

How to lower cost without creating a gap

Insure to an accurate value, choose the highest deductible your lender accepts and your reserves can absorb, secure the site, keep the schedule realistic, group projects under one portfolio program, and compare multiple carriers. Never save money by dropping vacancy, liability or theft protection, because those gaps turn ordinary losses into uninsured ones.

How to set the right limit

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Insure to completed value

Builder's risk limits are based on the estimated completed value of the project (IRMI). When the limit falls short, many forms reduce claim payments in proportion. Adjusters International gives the standard coinsurance formula: insurance carried divided by insurance required, multiplied by the loss. If a policy requires insurance equal to 80 percent of value and you carry 60 percent, you collect 75 percent of each loss (60 divided by 80) and absorb the rest, even on a small claim.

The 80 percent rule on dwelling and landlord policies

Residential policies apply a version of the same idea. According to the New York Department of Financial Services, when you insure a home for at least 80 percent of its replacement cost, a replacement cost policy pays without deducting depreciation. Insure for less, and a partial loss is paid at the greater of its actual cash value or a proportional share of the repair cost. That is why OfferMarket's DSCR guidelines require the greater of 80 percent of replacement cost or the loan amount once the property becomes a rental (OfferMarket).

What belongs in completed value

Materials and labor. Count the full cost of the work, not only materials.

Contractor overhead and profit. These can represent up to 20 percent of completed value, and leaving them out sets the limit too low (Adjusters International).

Not land. Land stays out of the insured value (Adjusters International; New York DFS).

Change orders. If the scope grows and the limit does not, coverage falls below completed value (Adjusters International). Update the limit when the budget changes.

The existing house. On a renovation, make sure the existing structure and the improvements together cover the full cost to rebuild.

ARV is not replacement cost

Investors think in after-repair value. Insurers think in rebuilding cost. ARV is a market value, and it includes the land and the neighborhood. Replacement cost is what it would take to rebuild the structure at current construction prices. The Oklahoma Insurance Department warns that confusing market value with rebuilding cost is a common mistake.

In expensive land markets, insuring to ARV can mean paying premium on value you could never collect. In lower-value neighborhoods, rebuilding cost can exceed ARV, and insuring to market value can leave you short after a total loss. OfferMarket's renovation policies are commonly written on a completed value form with the dwelling limit set to the property's ARV or an ARV-based replacement cost estimate (OfferMarket), and our quality control checks dwelling limits in both directions. Use the ARV calculator for market value, and ask for a replacement cost estimate on the structure itself.

When the loan sets the limit

OfferMarket's fix and flip guidelines set the property limit at replacement cost, taken from the appraisal or a replacement cost estimator, or at the loan amount. If the loan amount is below replacement cost, the policy must be written on an agreed value basis or carry zero coinsurance (OfferMarket).

When coverage starts and ends

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Starting coverage

Bind coverage before you close, because your lender, or your title company on a cash purchase, will require proof of insurance (OfferMarket). On new construction, have builder's risk in place by the time materials are delivered, not only when vertical construction begins.

Buying coverage in the middle of a rehab

You can often buy coverage after work has started, but you must disclose the work already done, and some insurers require an inspection or limit certain coverages (OfferMarket). One major program asks for the percentage complete, and projects more than 30 percent complete face additional underwriting review.

What ends coverage

Builder's risk ends automatically, often without a reminder, when a termination trigger occurs. On residential projects, the common triggers are:

• Ownership transfers to the buyer.
• A set period passes after construction is complete, commonly 90 days.
• The property is occupied or put to its intended use. One major form ends coverage 90 days after initial occupancy, except for a single-family home being remodeled.
• A single-family home is leased or rented.
• 50 percent or more of the units in a 2 to 4 family units are leased.
• Permanent property insurance takes effect.
• Your interest in the property ends, or you abandon the project.
• The policy term expires.

The finished flip that does not sell

If the work is done and the listing sits, a completion trigger can end builder's risk while you still own a vacant house. For finished new homes waiting to sell, one major program offers a second builder's risk term or an unsold dwelling policy (US Assure). For a renovated flip, a vacant property policy can fill the gap, and one program lets you convert it to a rental dwelling policy if you decide to rent instead.

The early tenant

On a BRRRR project, a tenant moving in can end builder's risk on the spot. On a duplex or fourplex, leasing half the units can do the same. Bind the landlord policy first.

Policy terms and renewals

Residential remodel policies are often written for six, nine or 12 months, and new home policies for a standard 12 months, with renewals or extensions subject to underwriting (US Assure). If your project runs past 12 months, many lenders require proof that the policy was renewed for a full term (OfferMarket).

Handing off to landlord insurance

If you keep the property, put the landlord policy in effect before you cancel the old one, send the new policy details to your servicer, and send the servicer's information to the new carrier (OfferMarket). If you sell, cancel after the transfer closes and request your pro rata refund.

What your lender requires

The property is your lender's collateral, so the lender's insurance guidelines shape the policy as much as your own preferences do. This table compares typical requirements during the rehab with the requirements after a refinance into a DSCR loan, which shows what has to change at the handoff.

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Sources: OfferMarket fix and flip insurance guidelines and OfferMarket DSCR insurance requirements.

The mortgagee clause. List the lender's exact name and address followed by ISAOA/ATIMA. OfferMarket's clause reads OfferMarket Capital LLC ISAOA/ATIMA, 627 S Hanover St, Baltimore, MD 21230 (OfferMarket). More detail is in our mortgagee clause glossary entry.

The named insured. Match the entity on title. OfferMarket Insurance supports personal name, LLC, C corporation, S corporation, revocable trust, land trust and LP vesting (OfferMarket). A mismatch between the deed and the policy is an easy way to delay a closing.

Carrier strength. An AM Best rating of A- falls in the Excellent category, and Financial Size Category VIII means policyholder surplus of "$100 million to $250 million" (OfferMarket).

Proof of insurance. OfferMarket requires an ACORD form, plus insurance certificates and invoices or paid receipts, at least 24 hours before closing, and final policy documents within 60 days after closing (OfferMarket).

If coverage lapses. Lenders can buy coverage for you and charge you for it. The CFPB notes that force-placed insurance is usually more expensive than a policy you buy yourself and often protects only the lender (CFPB). OfferMarket's guidelines warn that a lapse can also lead to loan default and personal liability for damages (OfferMarket).

Where claim money goes. With the lender on the policy, claim checks are often payable to both you and the lender, and banks differ in how they release the funds (HelpWithMyBank.gov). Lenders may apply the money to the loan or release it for repairs, often in stages (Chase). On a rehab loan, expect claim funds to move through inspections much like your draws, and talk with your lender before you hire a repair contractor.

If you finance through OfferMarket Capital, our lending and insurance teams coordinate these requirements during underwriting and after closing.

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How location changes your coverage

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Flood zones

Builder's risk excludes flood, so a property in a FEMA special flood hazard area needs a separate flood policy, and your lender will require one. OfferMarket's guidelines set the flood limit at the greater of "$250,000 or the loan balance" (OfferMarket). The National Flood Insurance Program caps residential building coverage at "$250,000 and residential contents at $100,000" (FEMA), so a larger loan balance may call for private or excess flood coverage.

Timing is the trap. NFIP policies normally take effect after a 30-day waiting period, but the wait does not apply when flood insurance is first purchased in connection with making, increasing, extending or renewing a loan (FEMA). Buy it at closing, not after. The NFIP also will not pay for damage from a flood that was already in progress when the policy took effect (FEMA).

Ground-up builds have their own flood rules. Buildings in the course of construction can be insured before they are walled and roofed, except when construction has been halted for more than 90 days or the lowest floor used for rating sits below the base flood elevation. Materials and supplies are insurable only when they are inside an enclosed building on or next to the premises (FEMA). Check every address on the FEMA Flood Map Service Center before you go under contract, and see our comparison of landlord insurance and flood insurance.

Coastal wind

Lenders do not accept property policies that exclude windstorm, hail or named storms (OfferMarket), which can make coastal coverage harder to place. Many coastal homeowners policies carry a separate hurricane deductible, generally 1 to 5 percent of the insured value, and United Policyholders reported these deductibles across 19 states plus Washington, D.C. Rules differ by state. In Florida, the hurricane deductible applies from the issuance of a hurricane watch or warning until 72 hours after it ends, and only once per season. Ask whether your quote carries a percentage wind deductible and whether your lender allows it.

The Texas coast

Many coastal Texas properties insure wind and hail through the Texas Windstorm Insurance Association, a residual market insurer that covers 14 coastal counties, including Galveston, Nueces, Cameron, Brazoria and Jefferson, plus the part of Harris County east of State Highway 146 (Texas Department of Insurance). Eligibility requires certification that the property meets building codes, and the state issues WPI-8 certificates to show that a property, repair or addition, including ongoing improvements, meets windstorm code. Not every repair needs an inspection, so check with the local windstorm inspection office before work starts. On a Galveston or Corpus Christi rehab, build those inspections into the schedule, because the certificate affects whether you can get wind coverage at all.

Cold climates and older rowhome markets

In cold-climate cities, apply the freezing rules above and winterize before any planned pause in the work. In older rowhome markets such as Baltimore, vacancy history, theft risk, fire spread to attached neighbors and code-upgrade exposure arrive together, which puts vacancy permits, theft coverage for stored materials, liability limits and ordinance or law at the top of the list.

How to handle a claim

The NAIC's claims guidance lays out the core steps for property owners. On a rehab, follow them in this order:

1. Make the site safe and report the loss promptly. Claims have reporting deadlines. For theft or vandalism, file a police report the same day, because the adjuster will ask for it.
2. Protect the property from further damage. Board up openings, tarp the roof and shut off the water. Insurers typically reimburse reasonable temporary repairs on covered losses.
3. Document before you clean up. Photograph and video the damage and list the damaged and missing materials. Delivery receipts and invoices prove what was on site.
4. Keep damaged materials for the adjuster whenever you can.
5. Get more than one repair estimate and keep every receipt.
6. Calendar every deadline. If the insurer asks for a signed, sworn proof of loss, note the due date the day you receive the request.
7. Bring in your lender early. Expect the claim check to name the lender and the lender to control how repair funds are released (HelpWithMyBank.gov).

Most disappointing builder's risk claims trace back to a short list: a limit below completed value, vacancy without an endorsement, theft of uninstalled materials excluded by the form, faulty workmanship rather than sudden damage, a termination trigger that ended coverage before the loss, late notice, or a project described inaccurately on the application. Every one of them is preventable before the loss.

Loss prevention on a residential job site

A loss you prevent never touches your premium or your schedule. Focus on the causes that drive most claims.

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Water. Water leads construction claims by frequency (Independent Agent). Shut off the main whenever no one is working. Get the roof and windows dried in early. Keep gutters and grading directing water away from the foundation. Store materials in a dry, covered staging area, elevated on pallets and wrapped (Builder Online). Inexpensive leak sensors near the water heater and new plumbing can flag a slow leak before it becomes a ceiling collapse.

Fire. Crew cooking and heating equipment and hot work cause a meaningful share of construction fires (Cozen O'Connor), and the International Code Council recommends a hot work program that follows local permit requirements. On a flip, that means no space heaters running overnight, an extinguisher on every floor, a fire watch after roofers or plumbers use torches, and daily debris removal. Because intentional fires lead in vacant homes (USFA), lock and board every opening and light the exterior.

Theft and vandalism. Lock every door, including garages and sheds. Schedule copper, appliance and HVAC deliveries close to installation. Add cameras on higher-risk sites and record appliance serial numbers when deliveries arrive. The stolen-appliance claim Victor Insurance describes began with an unlocked garage and an unchecked weekend.

Weather. Tarp open roofs before storms, secure loose materials and dumpster lids, and watch the forecast closely during framing and roofing.

Playbooks by investor strategy

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Your first fix and flip

Make three decisions before closing. Choose a fix and flip policy that combines property coverage, a vacant property endorsement and general liability, since your lender will require both property and liability protection (OfferMarket). Set the limit using your lender's guideline and a realistic completed value. Bind before closing. Then add the premium to your holding costs in the fix and flip calculator, and match your financing to your timeline with a fix and flip loan.

BRRRR

A BRRRR project runs two kinds of coverage in sequence: renovation coverage during the rehab, then a landlord policy with liability and loss of rent once a tenant moves in, because occupancy can end builder's risk. DSCR requirements differ from rehab requirements, as the lender table shows (OfferMarket). Some fix and flip policies are designed to stay in effect as landlord insurance once the property is rented (OfferMarket), which simplifies the handoff. If the property sits vacant during lease-up, notify the carrier and obtain a vacancy permit (OfferMarket). Run the refinance math with the BRRRR calculator and the DSCR calculator.

Value-add on a 2 to 4 unit building with tenants in place

Renovating vacant units while others stay occupied is a common small multifamily play, and one of the harder ones to insure correctly. Confirm that the renovation coverage allows partial occupancy and know the leasing threshold that ends it, which is 50 percent of units in one major program (US Assure). Keep loss of rents on the occupied units, and keep liability limits high, since tenants and their guests walk past an active job site every day. If the fix and flip policy cannot accommodate tenants, use a landlord or hybrid policy (OfferMarket).

Ground-up and infill builds

New construction is where standalone builder's risk fits best. Classify the project as new construction (US Assure), insure to full completed value, put coverage in place before materials arrive, and add general liability separately. In a flood zone, follow the NFIP construction rules above. Plan for the period between completion and sale, and estimate your financing with the construction loan calculator.

Wholesalers who take title

If you double close and take title, even briefly, you own the property risk while you hold title. OfferMarket lists wholesalers who take title before resale among the investors who need fix and flip coverage (OfferMarket).

Several projects at once

Blanket policies cover all properties under one policy, scheduled policies list each property with its own limit and premium, and master policies combine coverages such as vacant property and builder's risk into one bill (OfferMarket). Renovations are often written as single-project policies (US Assure). Keep a calendar of every policy, completion and occupancy date, because each one can end coverage.

Builder's risk insurance guidelines

Below, you will find common builder's risk insurance guidelines for fix and flip loans (otherwise known as hard money loans). These coverage limits are generally considered best practice from a risk management perspective.

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Property coverage

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General liability coverage

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Business interruption insurance

This is optional but important if you plan to keep tenants in the property while the policy is in effect. Some fix and flip insurance policies are designed to remain in effect as landlord insurance once the property is rehabbed and rented.

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Flood insurance

If the property is in a FEMA special flood hazard area, then it may be required by your lender to obtain flood insurance.

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Additional details

If there is a lender involved in your fix and flip project, then you will be required to include your lender's mortgagee clause. This

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The OfferMarket builder's risk recipe

Our insurance team uses this seven-step method to structure renovation coverage for 1 to 4 unit investors. Each step closes a gap that commonly causes a denied or underpaid claim.

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1. Classify the project accurately. Cosmetic rehab, structural remodel, gut rehab or ground-up build. Disclose work already started, the property's vacancy history, any tenants in place and the expected timeline.
2. Set the limit on completed value. Start from the rebuilding cost of the finished house and your lender's guideline. Include contractor overhead and profit, exclude land, and confirm the existing structure is covered.
3. Close the vacancy gap. Confirm a vacant property endorsement or vacancy permit for the full rehab period, and keep a dated work log from day one.
4. Confirm theft coverage for stored materials. Ask specifically about uninstalled appliances, copper and fixtures, on site and in storage, and about any sublimit or security condition.
5. Add general liability at lender limits. For the rehab, "$1,000,000 per occurrence and $2,000,000 aggregate" on an occurrence basis, with the lender as additional insured.
6. Add ordinance or law, and price loss of rents and soft costs. We typically request 25 percent ordinance or law on fix and flip quotes. Add loss of rents for tenanted units and price soft costs when your profit depends on the timeline.
7. Name the lender correctly and plan the exit. Use the exact mortgagee clause with ISAOA/ATIMA, then decide how you will hand off: cancel pro rata at sale, switch to landlord insurance before a tenant moves in, or align with DSCR requirements at refinance.

Builder's risk checklist for 1 to 4 unit investors

• ✅ Policy bound and proof of insurance delivered before closing
• ✅ Policy type matches the scope: cosmetic, structural, gut rehab or ground-up
• ✅ Limit set on completed value: land excluded, overhead and profit included
• ✅ Existing house insured, not only the renovation
• ✅ Vacant property endorsement or vacancy permit for the full rehab period
• ✅ Theft of uninstalled appliances and materials covered, with sublimits known
• ✅ General liability at lender limits, occurrence basis, lender as additional insured
• ✅ No windstorm, hail or named storm exclusion; any percentage wind deductible approved
• ✅ Ordinance or law included; loss of rents added for tenanted units
• ✅ Mortgagee clause exact, with ISAOA/ATIMA; named insured matches title
• ✅ Flood zone checked; flood policy bound at closing if required
• ✅ Contractor certificates on file, with additional insured endorsements requested
• ✅ Winter plan in place: heat maintained, or water shut off and lines drained
• ✅ Completion, occupancy and sale dates tracked; landlord or vacant policy lined up for the exit

How OfferMarket Insurance works

OfferMarket Insurance is a rate shopping platform built for 1 to 4 unit residential real estate investors. In under a minute you can request quotes across 40+ carriers, and our team quality-checks each quote against your preferences and your lender's guidelines before you bind (OfferMarket). We handle single properties and portfolios, entity vesting, fast certificates for closing and lender coordination, and when the tenant moves in, we help you move to landlord insurance without a gap.

Frequently asked questions

What does builder's risk insurance cover?

It covers a house under construction or renovation and the materials going into it against perils such as fire, wind, hail, theft and vandalism. Many residential policies also cover materials in transit or in storage, debris removal and scaffolding.

Do I need builder's risk insurance for a fix and flip?

If the house is vacant and under renovation, a homeowners policy is the wrong fit, and lenders require property and liability coverage before closing. A fix and flip policy that includes builder's risk features, a vacancy provision and general liability is the common solution (OfferMarket).

Does my homeowners policy cover a renovation?

Generally not, according to US Assure. On an investment property, a homeowners policy is also the wrong form, and carriers can deny claims when a tenant lives in a home insured as owner-occupied (OfferMarket).

Is builder's risk insurance required by law?

Usually not, but local municipalities and lenders may require it before work or funding begins (Chase).

Does builder's risk include liability coverage?

No. A standalone builder's risk policy does not cover injuries or liability (US Assure). Fix and flip lenders typically require general liability of "$1,000,000 per occurrence and $2,000,000 aggregate" (OfferMarket).

Does builder's risk cover stolen appliances and materials?

Often, but not always before they are installed. Some policies exclude theft of materials not attached to the structure (Victor Insurance). Confirm the wording before deliveries arrive.

Can I buy builder's risk after the rehab has started?

Often yes, but you must disclose the work already done, and some insurers require an inspection (OfferMarket). Projects more than 30 percent complete may face extra underwriting review.

Can I renovate a duplex or fourplex while tenants live in some units?

Yes, with the right coverage. Some remodeling programs allow it while less than half the units are leased (US Assure). Add loss of rents for the occupied units, and use a landlord or hybrid policy if your fix and flip policy cannot cover tenants (OfferMarket).

What happens to my policy when I sell, rent or refinance?

Builder's risk ends at a sale, at occupancy or a set period after completion (US Assure). Sellers cancel and request a pro rata refund where the policy allows it. Investors who keep the property switch to a landlord policy that meets DSCR requirements (OfferMarket).

How long does a builder's risk policy last?

Residential remodel policies often run six, nine or 12 months, and new home policies a standard 12 months, with extensions subject to underwriting.

How much does builder's risk insurance cost?

Rules of thumb put it at about 1 to 5 percent of the construction budget (NerdWallet). OfferMarket's sample fix and flip rates run from "$1,000 to $3,500 a year across example properties (OfferMarket).

Fix and flip insurance by state

Coverage, pricing and hazards vary by market. See our state guides for:

• Fix and Flip Insurance Alabama
• Fix and Flip Insurance Alaska
• Fix and Flip Insurance Arizona
• Fix and Flip Insurance Arkansas
• Fix and Flip Insurance California
• Fix and Flip Insurance Colorado
• Fix and Flip Insurance Connecticut
• Fix and Flip Insurance Delaware
• Fix and Flip Insurance Florida
• Fix and Flip Insurance Georgia
• Fix and Flip Insurance Hawaii
• Fix and Flip Insurance Idaho
• Fix and Flip Insurance Illinois
• Fix and Flip Insurance Indiana
• Fix and Flip Insurance Iowa
• Fix and Flip Insurance Kansas
• Fix and Flip Insurance Kentucky
• Fix and Flip Insurance Louisiana
• Fix and Flip Insurance Maine
• Fix and Flip Insurance Maryland
• Fix and Flip Insurance Massachusetts
• Fix and Flip Insurance Michigan
• Fix and Flip Insurance Minnesota
• Fix and Flip Insurance Mississippi
• Fix and Flip Insurance Missouri
• Fix and Flip Insurance Montana
• Fix and Flip Insurance Nebraska
• Fix and Flip Insurance Nevada
• Fix and Flip Insurance New Hampshire
• Fix and Flip Insurance New Jersey
• Fix and Flip Insurance New Mexico
• Fix and Flip Insurance New York
• Fix and Flip Insurance North Carolina
• Fix and Flip Insurance North Dakota
• Fix and Flip Insurance Ohio
• Fix and Flip Insurance Oklahoma
• Fix and Flip Insurance Oregon
• Fix and Flip Insurance Pennsylvania
• Fix and Flip Insurance Rhode Island
• Fix and Flip Insurance South Carolina
• Fix and Flip Insurance South Dakota
• Fix and Flip Insurance Tennessee
• Fix and Flip Insurance Texas
• Fix and Flip Insurance Utah
• Fix and Flip Insurance Vermont
• Fix and Flip Insurance Virginia
• Fix and Flip Insurance Washington State
• Fix and Flip Insurance Washington DC
• Fix and Flip Insurance West Virginia
• Fix and Flip Insurance Wisconsin
• Fix and Flip Insurance Wyoming

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Protect and grow your portfolio with OfferMarket

Builder's risk insurance is a line of defense for the most exposed months of any deal, when the house sits open, empty and half finished. Between vacancy clauses, stolen appliances, frozen pipes, coastal wind, flood zones and lender requirements, experienced investors know that protecting capital during a rehab matters as much as the profit at the end of it.

OfferMarket's insurance platform works for a first cosmetic flip and for a pipeline of rehabs and ground-up builds across several markets. We check the coverage, the deductibles and the lender requirements so that you can focus on the project.

Protect your capital. Protect your reputation. Protect your future in real estate investing.

OfferMarket serves 1 to 4 unit investors at every stage, from a first rowhome rehab in Baltimore to BRRRR rentals, small multifamily value-add and infill new construction across the country. ⚡ Get my instant quote

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