Insuring Your Dream Home Build

How to Insure a House Under Construction

If you're building a new home, it's important to get the right insurance to protect your investment. Standard homeowners insurance won't cover a property that's still under construction, so you'll need a different type of policy. This is usually called builder's risk insurance or new home construction insurance, and it covers risks such as theft of materials, vandalism, fire, and other types of damage. It also covers equipment and liability protection. You may be able to get this insurance through your builder, but it's important to check the details of their policy to make sure you're adequately covered. If not, you'll need to purchase your own policy. The cost of builder's risk insurance depends on factors such as the location, construction type, materials used, and expected completion date. It's important to discuss your insurance needs with a professional to ensure you have the right coverage in place before construction begins.

Builder's risk insurance

Builders Risk Insurance

Builders risk insurance is a type of insurance that covers a property during construction or major renovation. It is designed to protect against risks that are unique to a building site, such as theft of construction materials and vandalism. This type of insurance is typically purchased by the builder or contractor but, in some cases, the property owner may need to get coverage.

Builders risk insurance is considered a specialised type of property insurance that is often required by lenders and can be complex and misunderstood. It is important to note that it does not cover losses that occur before construction begins or after the project is complete. Once construction is finished, the coverage can be shifted to a standard homeowners policy.

Who Needs Builders Risk Insurance?

Any person or company with a financial interest in the construction project needs builders risk insurance. This includes property owners, do-it-yourself builders, general contractors, architects, and engineers. If there are multiple parties involved in the construction project, the general contractor will usually purchase the policy and be the primary insured, while the building owner and subcontractors are listed as additional insureds.

Builders risk insurance covers the risks associated with construction, including on-site equipment, materials, and supplies. It also covers additional soft costs or expenses not directly related to construction if property damage causes a delay. This can include interest on loans, debris removal, and disposal in the event of a loss.

Builders risk insurance policies typically cover damage or loss resulting from:

• Vehicle or aircraft collision
• Vandalism
• Fire
• Acts of God, such as hurricanes

Builders risk insurance policies typically do not cover:

• Earthquakes
• Floods
• Wind or beach zones
• Acts of terrorism and war
• Mechanical breakdowns
• Damage due to faulty design
• Workmanship and materials
• Wear and tear

The cost of builders risk insurance depends on various factors, including the construction materials used, the location of the project, the timeline of the project, and the square footage of the construction site. The cost of the policy is typically between 1% and 5% of the total construction budget.

Homeowners insurance

Builder's Risk Insurance

Builder's risk insurance, also known as construction loan insurance, home building insurance, or renovation insurance, is a type of insurance that covers the property while it is under construction. It is typically purchased by the builder or contractor but, in some cases, may need to be obtained by the homeowner. This type of insurance covers risks such as theft or vandalism of tools and materials on the site, as well as fire and other risks. It is important to note that builder's risk insurance does not include personal liability protection, so additional insurance may be needed to cover this aspect.

New Home Under Construction Insurance

New home under construction insurance is designed to protect your home and investments while it is being built. This type of insurance covers the risks that construction materials face when fixtures and uninstalled equipment are on-site or in transit to your home. It is more specific than a standard homeowners policy and is necessary to ensure you are adequately protected during the construction phase.

Home Insurance During Construction

When insuring a home that is under construction, it is important to work with your insurance company to ensure you have the necessary coverage. A standard home insurance policy will not cover a home that is under construction, so a builder's risk insurance policy or a new home under construction insurance policy may be needed. These policies offer less coverage than a typical homeowners policy but will protect the physical structure of the dwelling, building materials, and on-site and off-site equipment.

Cost of Insurance for a Newly Built Home

The cost of insurance for a newly built home will depend on various factors, including the location, construction type, materials used, and expected completion date. On average, you can expect to pay $80 per month to insure a new build, with rates increasing incrementally as the home ages beyond 30 years. Insurance companies favour insuring new homes due to their lower-risk profiles, and many companies offer discounts for new construction.

Tips for Insuring a New Home

When insuring a new home construction, it is important to consider the following:

• Don't rely solely on your contractor's coverage, as their insurance may only cover their business and not your property.
• Evaluate your needs and update your policy accordingly as the building process nears completion.
• Insure your new home with a company that rewards smart habits, such as equipping your home with safety devices like smoke alarms and burglar alarms.

Vacant home insurance

The cost of a vacant home insurance policy is more expensive than a standard insurance policy for an occupied home. The average cost is about 50%–60% more. If the home doesn't sit vacant for long, the annual cost may be prorated, and some companies may also allow you to purchase shorter-term policies.

To purchase vacant home insurance, first, determine whether you need a vacant home insurance policy. Then, see what's available through your current insurance provider. If they don't offer vacant home insurance, shop around and compare quotes from other providers. Once you know which provider you're using, gather the necessary documents to apply for coverage, such as a government-issued ID and proof that you own the property.

Construction loan insurance

Builder's risk insurance policies typically cover the building itself, as well as equipment, construction materials, temporary structures, valuable documents, and data. It also covers "soft costs", which are expenses incurred due to construction delays, such as additional interest on loans. The policy usually starts when the contracts are signed and ends when the project is completed or the building is occupied.

The cost of builder's risk insurance typically ranges from 1% to 5% of the total construction project budget and depends on factors such as the project's cost, location, timeline, square footage, and the expertise of the contractors. It is recommended to work with an experienced insurance broker or agent to assess the risks and determine the appropriate level of coverage.

While builder's risk insurance provides crucial coverage, it does not cover everything. Common exclusions include damage from earthquakes, floods, acts of terrorism, mechanical breakdowns, and faulty design or workmanship. Additional insurance may be needed to cover these risks.

Renovation insurance

Builder's risk insurance generally lasts up to 12 months but can be renewed. It typically costs between 1% and 4% of the budget for construction, depending on factors like the replacement cost of the completed home, square footage, and materials used.

When planning a renovation, it is important to review your insurance coverage to ensure that you are adequately protected. Renovation projects typically increase the value of your home, which may result in a higher insurance premium. For example, if you are putting an addition onto your home and increasing its square footage, your existing homeowners policy may not be sufficient.

Some home improvement projects may lower your insurance rate. For example, roof replacements generally earn a lower rate as the age and material of your roof are key cost factors for dwelling coverage. Upgrading your wiring can also reduce your premiums as outdated wiring has a higher risk of causing fires.

It is recommended to inform your insurer of any major home improvement projects that may impact your insurance premium.

Frequently asked questions