Is Your Hotel Covered During a PIP Renovation?

Maybe, but do not assume it. A property improvement plan renovation changes almost every part of your hotel's risk: the building's value, its occupancy, who is on site, and how much revenue you are earning. Your existing policy was written for an operating hotel. Before the first room goes out of service, your property, liability, and business income coverage should be reviewed, and in most cases adjusted.

Does my hotel property policy cover the renovation work?

Your property policy covers the existing building. It may or may not cover the new work while it is underway, the materials stored on site, or the contractor's equipment. Many owners and contractors assume the other party is insuring the project. Settle that in writing.

There are generally two ways to cover the work itself:

• Builders risk insurance. A separate policy covering the project during construction, including materials on site and in transit. Renovation versions of builders risk can also be written to address the existing structure, but many standard forms cover only the new work.
• An endorsement to your property policy. For smaller projects, some carriers will add coverage for renovations and materials to the existing policy.

Your construction contract should say who buys builders risk, who is named on it, and who pays the deductible.

Can a renovation make my hotel "vacant" under the policy?

It can, and the consequences are serious. Under the standard commercial property form, a building can be considered vacant when less than 31% of its square footage is used for customary operations. If a building has been vacant for more than 60 consecutive days before a loss, the standard form removes coverage for vandalism, sprinkler leakage, building glass breakage, water damage, and theft, and reduces payment on other covered losses by 15%.

The standard form also says buildings under construction or renovation are not considered vacant, which helps. But a property that closes entirely, or a building on a multi-building campus that is gutted and idle while permits are pending, can still raise questions. If a building will be closed or mostly empty, tell your carrier in advance and ask for a vacancy permit or written confirmation of coverage.

What insurance should my renovation contractors carry?

Every contractor and subcontractor on site should provide certificates and, more importantly, the endorsements behind them. At a minimum, require:

• Commercial general liability, with the hotel owner, management company, and usually the brand named as additional insureds for both ongoing and completed operations
• Primary and non-contributory wording and a waiver of subrogation in your favor
• Workers' compensation and employers' liability
• Commercial auto liability
• Umbrella or excess liability at a limit that fits the project

Completed operations coverage matters because construction defects often show up after the job is done. A leaking window installed during the renovation can cause damage a year later.

Does liability coverage change during a renovation?

The exposure does. Guests, contractors, and debris share the same building. Common claims include guests tripping in construction areas, dust and noise complaints, damage to guest vehicles from falling debris, and injuries to contractor employees who then sue the owner. Practical steps:

• Separate construction zones from guest areas with signage and barriers
• Require hold-harmless and indemnity agreements in every contract
• Confirm your general liability carrier knows renovation is occurring while the hotel is open

How does a renovation affect business income coverage?

Two ways. First, taking rooms out of service on purpose is not a covered loss. Business income will not pay for revenue you give up during planned renovation. Second, the project can delay reopening after a covered loss. Many policies include coverage for delay in completion only under builders risk with a soft costs or delay in startup extension. If a fire during construction pushes reopening back six months, you want to know in advance whether that lost revenue is covered.

After the renovation, update your business income worksheet. Higher room rates and restored inventory mean a higher limit.

What fire risks increase during a hotel renovation?

Hot work, meaning welding, cutting, and torch-applied roofing, is a common cause of fires during construction. Sprinkler systems are also sometimes shut down during renovation. Carriers may require:

• A hot work permit program with a fire watch after work ends
• Notice before any sprinkler or alarm impairment
• Regular removal of construction debris

Your policy may include protective safeguards conditions that limit coverage if required systems are turned off without notice. Review them before work begins.

Should I update my property limit after a PIP?

Yes. New finishes, systems, and furniture increase replacement cost. If your building limit does not keep pace, you could face a coinsurance penalty after a loss. We explain why in our article on appraised value versus rebuild value. Also confirm you carry ordinance or law coverage, since a major renovation can trigger code upgrades after a future loss.

Frequently asked questions

Who usually buys builders risk on a hotel renovation?

It varies. Owners often buy it to control the coverage, but contracts sometimes assign it to the general contractor. The contract should decide it clearly.

Does my brand need to be notified of renovation insurance?

Many brands require additional insured status on contractor policies and may have specific requirements for work at branded properties. Check your franchise agreement and brand standards.

When should I call my agent about a PIP?

Before you sign the construction contract. That is when insurance requirements can still be negotiated into the agreement.

Review your coverage before work begins

If you are planning a PIP or renovation at a hotel in Guadalupe, Comal, or the surrounding counties, send us your construction contract and current policies. We will tell you what needs to change before the first room closes. Call 830-303-8300 or visit our hotel insurance page.