What Is Builder's Risk Insurance?
Builder's risk — sometimes called course-of-construction insurance — covers a building project from groundbreaking through completion. It protects the structure, materials, work-in-progress, and (with the right endorsements) soft costs like architect fees and permit costs. Coverage runs from project start through certificate of occupancy or first occupancy, at which point a property policy takes over. The Insurance Information Institute describes builder's risk as the only mechanism that fully covers a structure during construction — standard property forms simply don't.
For STR owners renovating between seasons, adding amenities, or building new properties intended for Airbnb or VRBO listings, builder's risk fills a specific coverage gap. Standard property policies have vacancy clauses, alteration-in-progress exclusions, and occupancy requirements that effectively suspend or void coverage during major renovation. New construction has no dwelling to insure under a property form at all. Builder's risk is the dedicated policy for these scenarios.
The National Association of Home Builders consistently recommends builder's risk for any residential project above small-renovation scope — and STR-purpose projects routinely sit at the larger end of the range. Coverage typically responds to fire, wind, theft of materials, vandalism, and certain water and weather events during construction. Flood and earthquake remain excluded unless separately endorsed.
Why Renovation Triggers a Coverage Gap on Most STR Properties
A standard property or dwelling policy is built around occupancy assumptions. The dwelling form assumes the property is in service, lived-in or rented, and not undergoing major structural alteration. When an Airbnb or VRBO property is closed for off-season renovation — drywall opened, plumbing rerouted, roof replaced — the property policy's vacancy clause and alteration-in-progress provisions typically suspend most coverage. The structure is still standing, but the policy isn't responding the way the host assumes.
The gap shows up most painfully on storm losses. A windstorm damages an in-progress renovation at your mountain cabin VRBO — partially-completed work and staged materials are destroyed. The property policy declines (alteration in progress, materially-changed risk). Without builder's risk, the entire loss is out-of-pocket. This pattern is common enough on coastal STR renovations during hurricane season that it's a primary driver of builder's risk uptake among multi-property operators.
What to look for: project-cost-sized limit (typical contract value plus contingency), policy term matching the realistic project timeline (3, 6, or 12 months, with extensions available), coverage of materials on-site and in-transit, optional soft-cost coverage (architect, permits, financing), and a clean handoff to the property policy at certificate of occupancy or first guest booking.
