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.
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:
Your construction contract should say who buys builders risk, who is named on it, and who pays the deductible.
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.
Every contractor and subcontractor on site should provide certificates and, more importantly, the endorsements behind them. At a minimum, require:
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.
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:
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.
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:
Your policy may include protective safeguards conditions that limit coverage if required systems are turned off without notice. Review them before work begins.
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.
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.
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.
Before you sign the construction contract. That is when insurance requirements can still be negotiated into the agreement.
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.