Renovation risks in the high-net-worth market

For the property and casualty (P&C) industry, this activity presents a dual challenge. Renovations change exposures in ways that are often overlooked. When they aren’t disclosed or managed properly, both carriers and insureds face coverage disputes, unexpected deductibles and liability complications. Brokers, underwriters and claims professionals must understand how these projects affect risk and take a proactive role in guiding clients through them.

Renovation coverage challenges

While renovations may look like routine property updates, they introduce unique coverage complexities in the HNW market. Several trends underscore the importance of vigilance:

• Undisclosed exposures: Homeowners often assume that cosmetic or design upgrades don’t affect coverage, but the reality is different. A temporary relocation during construction or disabling alarm systems to accommodate contractors alters the exposure profile dramatically. In fact, a survey found that among insured homeowners who completed renovations during the pandemic, only 40% updated their policies to reflect the changes.
• Policy reclassification needs: When renovation projects exceed 10% of a property’s insured value, or when they extend beyond a year, they may trigger a shift from a homeowner's policy to a builder’s risk or course of construction policy. That can also mean significant deductible changes. A $5,000 deductible on a $1 million home could retroactively escalate to $50,000 once the scope of renovation is uncovered.
• Insurance-to-value concerns: Construction costs rose 44% from December 2019 through December 2021, yet only 30% of homeowners increased their insurance coverage accordingly. Even outside of major projects, underinsurance is widespread: 18% of U.S. homeowners already consider themselves underinsured, and 38% don’t know how to assess their coverage needs. Add a $250,000 renovation on top of those gaps, and the problem compounds.
• Third-party liability: Contractors and subcontractors bring their own exposures. If they lack adequate general liability (GL) or workers’ compensation (WC) coverage, insurers may have no viable path to recover losses. In the HNW space, it’s not unusual to see multimillion-dollar properties renovated by contractors carrying just $1 million in liability coverage — a mismatch that creates downstream risk.
• Claims settlement pitfalls: When renovations aren’t disclosed, claims staff are left scrambling to determine scope. If they discover a major project only after a loss occurs, the settlement may be contested, delayed or subject to unexpected policy provisions.

Turning risk into opportunity

Fortunately, P&C professionals are well-positioned to mitigate these risks. With proactive communication, documentation and policy alignment, brokers and carriers can protect clients while strengthening their own role as trusted advisors.

• Educate early: The simplest way to close the gap is to make disclosure part of the renovation process. Encourage insureds to notify their broker or carrier of any project that a) requires them to move out, b) disables a security system or c) exceeds 10% of dwelling value. These are practical triggers that resonate with clients and reduce the chance of oversight.
• Request documentation and COIs: Require contractors and subcontractors to provide certificates of insurance (COIs), confirming adequate GL and WC coverage. This ensures alignment with the property’s value and reduces disputes if accidents occur.
• Clarify settlement provisions: Brokers should explain how renovations may affect deductibles or policy classification. Carriers can support this effort by training claims staff to ask renovation-specific questions during intake, ensuring consistent and transparent handling.
• Reassess valuation: A mid-renovation or post-renovation appraisal should be standard practice in the HNW segment. This keeps policies aligned with true replacement cost and prevents insured-to-value penalties. In a market where luxury materials and custom installations are the norm, valuations can shift dramatically in just a year.
• Prepare broker claims staff: Claims teams must be ready to probe for renovation exposure: “Was a contractor working on the property?” “Did you relocate during the project?” “Was specialized equipment installed?” The answers directly impact how policies respond and reduce friction in the settlement process.

A strategic imperative

The HNW renovation trend isn’t slowing. Even with inflationary pressures and tighter credit markets, affluent homeowners continue to invest heavily in lifestyle-driven property upgrades. For brokers, carriers and claims professionals, these projects are both a liability and an opportunity. By addressing renovation exposures proactively, the P&C industry can prevent disputes, reduce losses and deliver a better client experience.

Renovations reshape homes, but they also reshape risk. Brokers and carriers who anticipate these changes and guide insureds through them not only safeguard portfolios but also deepen client trust in an increasingly complex market.

Frank DiGrande is senior vice president, Private Client Chief Claims and Risk Officer at HUB Private Client.

See also:

• These are the wealthiest suburbs in the U.S.
• Things you never say to wealthy clients
• Best practices for reducing wealthy-client risk in 2025