Do I Need Homeowners Insurance While Building A New House?

Few times in life will you face as many choices as you while building a house from the ground up. Which floor plan are you looking for? Whom should you hire as a contractor? Which is better, brick or wood siding? Kitchen hardware in brushed gold or brass? The options are limitless.

However, one of the most critical considerations you must make is your homeowners' insurance. Insurance for new home buildings is distinct from homeowners insurance for a completed structure. You may be wondering if you need home insurance while your house is still being built.

The answer is a resounding YES. Simply because your house is not complete does not negate the necessity for insurance. You've invested a substantial sum of money in this property, and you're also taking a substantial risk. While you will need to obtain insurance while your home is being constructed, it will not be the same type of insurance that you would normally obtain on a property. A standard homeowners insurance policy includes coverage for theft of personal goods, which you are unlikely to require when building a home.

You must acquire builder's risk insurance. This ensures that coverage is in place in the event that something happens to the house's framing or other components during the scheduled build. While some insurance firms offer a distinct builder's risk coverage, others offer it as an endorsement of a homeowners policy. Consult your agent to gain a better understanding of your policy requirements.

What is builder's risk insurance, and how does it work?

Although builder's risk insurance policies come in a variety of forms, they always serve the same objective of safeguarding buildings while they are under construction. Builders risk insurance is designed to cover loss and damage on a construction site, thereby protecting your investment in the event of a disaster.

When should the builder's risk insurance be purchased?

If you're wondering when the builder's risk insurance policy should begin, it should begin prior to the commencement of construction. It is preferable to have a policy in place before the first nail is driven. It is a myth that insurance is not necessary until you move into your home. When a family is building a new house, the last thing they need to worry about is what they will do if the structure is damaged during the construction process.

Who is accountable for a builder's risk insurance policy?

Assume that your builder carries all necessary insurance to protect your property. As the property owner, you will need to obtain coverage for your property during the construction phase. This will cover the structure if it needs to be repaired or replaced following a loss caused by a covered risk. In most cases, your contractor's insurance policy excludes coverage for hurricanes, tornadoes, fires, and other natural catastrophes. Your agent can assist you in determining the most appropriate level of coverage for your circumstances.

What does a builders risk policy cover?

Because each insurance provider and policy is unique, you must choose which policy best matches your needs. Builders risk insurance is frequently limited to construction coverage; however, it is critical that you obtain liability coverage as well, whether through a builders risk policy that includes liability coverage or through a stand-alone liability policy. Consider bringing your mother-in-law to see how the new house is progressing. She trips over a step on your property and breaks her arm. Who is accountable for this risk? That you are. Or what if a neighboring child accidentally steps on your newly laid slab and gets a nail in his foot (or anything worse)? You may be facing substantial medical bills and possibly a lawsuit, and liability coverage may assist cover those expenses.

Check to see if the builder's risk endorsement provides limited coverage for theft of materials or supplies owned by a third party. Additionally, there is a builders risk theft endorsement that provides theft coverage for a building under construction, but the dwelling must be fully enclosed and lockable.

Once a construction project is complete, the builder's risk policy can be converted to a standard homeowners policy, which will cover the completed dwelling and its contents.