Builder’s risk insurance for flips is almost always sold as a pay-in-full policy with 100% earned premium. That means if you buy a six-month term and finish the rehab in three, the carrier keeps every dollar — you do not get half of it back.
Ian Bertini, co-owner of BPI Insurance Advisors in San Antonio and a continuing-education instructor on property risk, says a growing number of carriers now offer monthly-pay renovation programs with reduced or no earned premium. Those programs fit cosmetic rehabs. They do not fit jobs that add a floor or square footage.
This guide covers where the line sits between the two, the three exposures every rehab and rental carries, and why your lender — not your risk tolerance — often makes the coverage decision for you.
Key takeaways
- Most builder’s risk policies are pay-in-full and 100% earned premium, so finishing a six-month rehab in three months means you paid double the coverage you used.
- Newer monthly-pay renovation programs carry little or no earned premium, letting you pay only for the months the property is actually under construction.
- Cosmetic scopes — paint, flooring, cabinetry — generally qualify for the alternative programs. Adding a floor or square footage still requires real builder’s risk.
- Scope the job before you bind coverage, not after. The scope determines which product you’re eligible for.
- A traditional mortgage lender dictates your coverage requirements. With a private lender or a free-and-clear property, the risk tolerance decision is yours.
From the Real Estate Pros Show
This article draws on an interview with Ian Bertini of BPI Insurance Advisors on the Real Estate Pros Show, hosted by Scott Bursey.
Why Builder’s Risk Costs More Than the Coverage You Use
The structural problem with builder’s risk is not the rate. It’s the payment terms.
“Builder’s risk most of the time is pay in full,” Bertini says. “Whether you’re looking at a three-month, six-month, 12-month policy, whatever it is, you have to pay it in full. Most builder’s risk plans are 100% earned premium — which means if you buy a six-month policy but you’re done in three months, they’re keeping all of the premium.”
Run that against how fast-turn flips actually work. You buy the six-month term because that’s the safe estimate, the crew moves faster than planned, and you list at week eleven. The unused three months of coverage are gone. There is no pro-rata refund, no credit toward the next deal.
Two things make this worse than it looks on a single transaction. First, the cost is front-loaded — you pay the full premium at closing, when capital is tightest and holding-cost math is most sensitive. Second, it repeats. An operator running eight to twelve rehabs a year is making the same overpayment eight to twelve times.
Bertini’s framing on how to measure this is worth borrowing: investors already track dollars spent on a per-transaction basis, and insurance should be evaluated the same way. If you can cut the insurance line on every deal, the annual number takes care of itself.
None of this means builder’s risk is the wrong product. For a long time it was the only product. It means you should know what the earned-premium clause costs you before you sign it, and you should check whether your scope qualifies for something else.
The Monthly-Pay Alternative Carriers Now Offer
More carriers are rolling out renovation programs that behave like a normal monthly policy instead of a lump-sum construction product. Bertini is direct that this is recent: historically, defaulting to builder’s risk was the correct call. It isn’t automatically anymore.
The differences that matter to an investor:
- Monthly billing instead of pay-in-full. You aren’t fronting three, six or twelve months of premium at acquisition.
- Reduced or no earned premium. “They aren’t 100% earned premium,” Bertini says. “Some of them have no earned premium.”
- You pay for the months you use. Finish the rehab early, stop paying. The savings show up on every deal that beats its timeline.
The practical effect is that your insurance cost tracks your actual hold period rather than your worst-case estimate. That also removes a small perverse incentive — under a fully earned six-month policy, there’s no financial reason to be conservative about the term you buy, so investors routinely buy more than they need.
These programs are not universal. Availability varies by carrier and by state, and the underwriting parameters are the whole ballgame — a program with no earned premium is worthless if your scope disqualifies you from it. Ask your agent two specific questions: does this carrier write a monthly renovation product in my state, and what construction scope will they accept on it? Bertini describes this as an area where more carriers are entering, which means the answer you got a year ago may be out of date.
Most builder’s risk plans are 100% earned premium — which means if you buy a six-month policy but you’re done in three months, they’re keeping all of the premium.
— Ian Bertini, BPI Insurance Advisors
Where the Line Sits: Cosmetic Rehab vs. Structural Work
The dividing line is whether you’re changing the building or refreshing it.
Bertini’s test is blunt. “If you’re doing something big — you’re adding a floor, you’re adding square footage — that’s a big job. We need builder’s risk for that.” On the other side: “What I see a lot of times is what are they putting, lipstick on a pig, right? So you’re putting new floor, you’re painting, maybe you’re adding some new cabinetry, things like that. That’s all fine. You’ll fall within those parameters of those programs that are out there.”
Roughly, the scope split looks like this:
- Usually fits a monthly renovation program: paint, flooring, cabinetry, fixtures, cosmetic kitchen and bath work — a property that stays the same building when you’re done.
- Usually requires builder’s risk: adding a floor, adding square footage, and other work that changes the structure’s footprint or framing.
The operational takeaway is about sequence. Scope the job before you bind coverage. Investors habitually order insurance the moment a contract goes hard, using a rough idea of the work, then finalize the scope with their GC two weeks later. If that scope creeps from cosmetic into structural after you’ve bound a renovation policy, you have a coverage problem, not just a pricing one.
If the scope is genuinely uncertain — you’ll know after demo whether you’re opening a wall — say so to your agent up front and price both paths. A carrier that finds out about undisclosed structural work at claim time is not a conversation you want to be in.
The Three Exposures Every Rental and Flip Carries
Bertini organizes every investor policy around three exposures, and building coverage in that order keeps you from missing one.
- Loss of the structure. The obvious one, and the one every policy addresses.
- Loss of rents or income. Critically, this does not require a total loss. “It doesn’t require the full loss of structure to lose those things,” he says. A fire that makes two units uninhabitable for four months kills the income without destroying the building.
- Liability. Low frequency, high severity. “The chances of something happening are pretty slim, but when it does happen, it’s not small.”
The gap he sees most often is the second one. “I’ve seen a lot of policies that I’ve reviewed that don’t account for loss of rents. One of the things that should be in a traditional landlord policy is coverage for loss of your rents. A lot of folks don’t realize that that’s part of it, but it should be.”
That’s a checkable item. Pull the declarations page on each rental you own and look for a loss-of-rents or fair-rental-value limit. If there isn’t one, you are covered for the building and uncovered for the reason you bought the building.
Liability is harder to size because the frequency is so low that nothing in your operating history tells you what the right limit is. That’s exactly why it gets underweighted — investors price coverage off what has happened to them, and a severity risk by definition hasn’t happened yet.
Who Actually Sets Your Risk Tolerance — You or Your Lender
Before you decide how much risk to carry, find out whether the decision is yours.
“If you have a traditional mortgage company tied to it, you don’t really get to pick your risk tolerance,” Bertini says. “They get to pick it for you. If you don’t — maybe you have a private lender or maybe you don’t have a lien on the house at all — well, now you get to determine how much risk you’re willing to take.”
That reframes the whole conversation. On a conventionally financed rental, the coverage floor is a lender requirement and your only real decisions are what to add on top. On a private-money deal or a free-and-clear property, you’re choosing deductibles, limits and whether to carry certain coverages at all.
Bertini runs a written questionnaire on every new property his investor clients bring him, because the exposure changes property to property even inside one portfolio. It captures whether the property is a flip or a rental, what the rents are so loss-of-rents is sized correctly, and where the investor’s risk tolerance actually sits.
His point on tolerance is one experienced operators will recognize: “I’ve got investors that have been at it a long time. They have teams of people that are going to come in and fix their roof if they need it, fix electrical issues if they need it. And so they’re not going to file a claim. Well, that’s a totally different risk profile than somebody that doesn’t have all that.”
An operator with in-house trades who would never file a $6,000 claim should be buying a higher deductible than a first-year investor with no crew. Same house, different correct policy.
Frequently asked questions
Do I need builder’s risk insurance for a cosmetic flip?
Not necessarily. A growing number of carriers now write monthly-pay renovation policies that accept cosmetic scopes — paint, flooring, cabinetry and similar work — with reduced or no earned premium. Ian Bertini of BPI Insurance Advisors says these programs have very few restrictions for that type of job.
Availability varies by carrier and state, so ask your agent specifically whether a monthly renovation product is available where the property sits and what scope the carrier will accept on it.
What does 100% earned premium mean on a builder’s risk policy?
It means the carrier keeps the entire premium regardless of when the policy ends. If you buy a six-month builder’s risk policy, pay it in full at closing, and finish the rehab in three months, there is no pro-rata refund for the unused three months.
On a fast-turn flip, that can mean paying for roughly twice the coverage period you actually used — and repeating that overpayment on every deal in the year.
Does a standard landlord policy cover lost rent after a fire?
Only if loss-of-rents coverage is actually on the policy, and Bertini says he regularly reviews landlord policies that don’t include it. It should be there, but plenty of investors assume it’s automatic and find out otherwise at claim time.
Also note that you don’t need a total loss to lose the income. Damage that makes a unit uninhabitable for a few months stops the rent while the building still stands. Check the declarations page for a loss-of-rents or fair-rental-value limit on every property you own.
What rehab scopes disqualify me from a monthly-pay renovation policy?
Structural work is the usual disqualifier. Bertini names adding a floor or adding square footage as jobs that require genuine builder’s risk rather than an alternative renovation program.
The practical rule: if the building will be a different building when you’re finished, expect to need builder’s risk. If you’re refreshing finishes on the same structure, you likely fall inside the alternative program’s parameters. Confirm the scope with your contractor before you bind coverage, not after.
How does my lender affect what insurance I can choose on an investment property?
A traditional mortgage lender sets your coverage requirements — as Bertini puts it, you don’t get to pick your risk tolerance, they pick it for you. Deductibles, limits and required coverages will be dictated by the loan documents.
With a private lender, or on a property you own free and clear, those decisions revert to you. That’s where an operator with in-house trades might reasonably carry a much higher deductible than a newer investor who would file every small claim.
The bottom line
Before your next rehab closes, do two things: get a firm scope from your contractor and ask your agent whether a monthly-pay renovation program is available for that scope in your state. If the job is cosmetic and the answer is yes, you stop funding coverage you never use — and if the job is structural, you’ll know to buy real builder’s risk before the crew shows up rather than after.
