Insuring Your New Home: When To Start

When to Insure a New Build House

If you're building a new home, it's important to consider insurance before construction begins. A new home under construction needs a different type of insurance than one that's move-in ready. New home construction insurance covers the added risks of building a home, like theft of materials or damage to existing structures. This type of insurance is usually short-term and covers the home until construction is complete, or for nine to 12 months afterward. Once construction is finished, you'll need to switch to a standard homeowners insurance policy.

New home insurance vs. new construction home insurance

Building a new home is an exciting time, but it's important to understand the different types of insurance policies available to protect your investment. New home insurance and new construction home insurance offer distinct types of coverage, and it's crucial to choose the right one to ensure you're adequately protected during and after the construction process.

New Construction Home Insurance

New construction home insurance, also known as builder's risk insurance, is a short-term insurance policy specifically designed for homes undergoing construction or renovation. It covers the unique risks associated with the building process, such as theft of construction materials, vandalism, damage to existing structures, and injuries to workers. This type of insurance policy typically lasts until the construction is complete or for nine to twelve months afterward. It is important to note that new construction home insurance does not cover medical payments for others or personal property.

New Home Insurance

New home insurance, on the other hand, is a long-term form of homeowners insurance specifically for recently built homes, generally those constructed within the last two years. It covers any structural, personal, or legal damages that occur after moving into the new residence. Unlike new construction home insurance, new home insurance does not cover building materials, supplies, or equipment. It's important to note that new home insurance typically only offers coverage for the first three to five years after a homeowner moves in, after which a standard homeowners insurance policy is required.

Key Differences

The main difference between new home insurance and new construction home insurance lies in the timing of coverage. New construction home insurance is necessary during the building process, while new home insurance is needed once the home is complete and you have taken ownership. Additionally, new construction home insurance covers the structure, building materials, supplies, and equipment, while new home insurance covers dwelling coverage, personal property, and liability.

When to Get Insured

It is recommended to purchase new construction home insurance before the construction begins to ensure any risks and losses during the process are covered. Once the construction is complete, you will need to switch to a new home insurance policy or a standard homeowners insurance policy if the home is more than two years old.

When to get homeowners insurance

If you're building a new home, it's important to consider how insurance factors into the construction process. The type of insurance you'll need will depend on the scope of the project. A home you're constructing from scratch won't be covered by standard homeowners insurance, whereas renovating an existing home may only require tweaks to your current policy.

New Construction Insurance

If you're building a new home, you'll need new home construction insurance or builder's risk insurance. This is a short-term policy that covers homes under construction or renovation. It includes coverage for the structure of the home, building materials, supplies, and equipment, both on and off-site.

You should purchase this insurance before construction begins to ensure any risks and losses during the process are covered. It's important to note that new construction insurance does not cover medical payments for others or living expenses.

Standard Homeowners Insurance

Once your new home is complete, you'll need to switch to a standard homeowners insurance policy. This insurance is long-term and covers any structural, personal, or legal damages you face after moving into your new home.

It's important to have this insurance in place before you take possession of the property. Standard homeowners insurance includes coverage for personal property, which is not included in new construction insurance.

Key Considerations

When insuring a new home, it's essential to discuss the details with your builder and insurance company to ensure there are no gaps in coverage. You should also consider the following:

• Contact your insurance company early in the process to go over the coverage you may need.
• Find out if your current insurer offers new construction coverage, or if you need to look elsewhere.
• If you own the land before construction begins, you may need builder's risk insurance even if you're hiring contractors.
• If you're custom-building a home on land you already own, you should get a new construction endorsement to protect yourself during the build.
• Review your builder's contract to determine who is responsible for purchasing insurance during construction.
• The scope of construction will impact the amount of insurance you need. Larger projects and occupying the property during construction will require more insurance.
• Take an inventory of your possessions during construction and get them insured.

Timing

The timing of when to get homeowners insurance depends on the phase of construction. You'll need new construction insurance from the beginning of the build until it's complete, then you'll switch to standard homeowners insurance before moving in.

Cost

Newly constructed homes often qualify for significant discounts on homeowners insurance due to lower risks of claims. New homes are less likely to have issues that lead to insurance claims, and insurers offer lower rates to reflect this.

When building a new home, it's crucial to have the right insurance coverage in place from the start of construction until you move in. By understanding the different types of insurance and when to get them, you can ensure your investment is protected throughout the entire process.

Builders' risk insurance

Builders Risk Insurance

Builders risk insurance, also known as course of construction insurance, is a type of property insurance that covers buildings while they are under construction. It is designed to protect construction projects from property damage and can be crucial in helping to protect your investment.

Builders risk insurance typically covers buildings and structures under construction, as well as equipment on-site, in transit, or at other locations. It can also provide liability coverage for claims of bodily injury suffered by non-employees on your construction site. Some policies may also offer coverage for temporary storage buildings, fencing, scaffolding, retaining walls, and more.

In addition, builders risk insurance can help cover the costs of equipment breakdown, repair, or replacement. It also covers materials and supplies used in the construction that are damaged or stolen.

Who needs builders risk insurance?

Anyone with a financial interest in a construction project should consider purchasing builders risk insurance. This includes homeowners, property owners, general contractors, and subcontractors. It is often required to comply with government regulations or as a condition of banking or other contractual arrangements.

The demand for builders risk insurance is usually time-sensitive. It is recommended to purchase this type of insurance before or on the date of construction when the contract is finalized. However, if construction has already started without insurance, you may still be able to obtain coverage by providing the percentage of construction completed during the application process.

The cost of builders risk insurance depends on the total estimated value of the completed building or structure, as well as any additional coverage options selected. The basic policy from the Builders Risk Plan insured by Zurich starts at $375 in most states.

Discounts for new builds

There are a few ways to get a discount on a new-build house. Firstly, it is important to understand that developers are open to negotiations and there are opportunities for buyers to secure more favourable terms. Developers are usually motivated to sell properties and may be more willing to negotiate to close a deal. It is essential to do your research and be prepared to walk away if the developer's terms don't align with your expectations.

Negotiating tactics

• Ask for a discount: While developers may not offer substantial discounts willingly, it is worth negotiating as they are open to it. Research indicates that buyers have successfully negotiated discounts of up to 14% off the original list prices.
• Negotiate financing: Your builder likely has a preferred mortgage lender, and there may be incentives for using their services. These incentives often include covering a portion or all of the closing costs, which can save you up to 5% of the loan value.
• Negotiate the build itself: It may be possible to negotiate over the new build itself, but builders often have a bottom-line price they need to get for the house. Work with an agent who can help you pull comps (comparable recently sold listings).
• Negotiate the price of the lot: If you are building a custom home, you may be able to negotiate a discount on the lot premiums. Some lots are more desirable than others, and you can ask for a premium lot at a lower price or choose a less desirable lot for a lower price.
• Ask for freebies: When purchasing a new build property, the standard features included in the list price are often basic. It is reasonable to request additional features as incentives, such as flooring, fixtures, or turfing the garden. Some developers may even offer to cover your stamp duty or conveyancing fees.
• Timing: The best time to negotiate a deal on a new build property is towards the end of the fiscal year when builders are keen to meet their sales targets. You may also be able to get a better deal on a nearly completed development or a show home.

Government schemes

In addition to negotiating with developers, there are also government schemes that offer discounts on new-build homes for first-time buyers. The First Homes scheme in the UK, for example, offers a 30% market discount on a proportion of new homes for eligible first-time buyers, with priorities given to veterans and key workers. This discount is locked into the property, so future sales of the home will also be at a discounted rate.

How to get your postcode recognised by insurers

When building a new home, it is important to consider how insurance factors into the construction. A new home under construction needs a different type of insurance than one that’s move-in ready. New home construction insurance will cover the added risks of building a home, like theft of construction materials.

Most insurance companies offer a home under construction insurance policy, which may also be referred to as residential construction insurance or builder's risk insurance. This type of insurance covers the building site, materials, and work in progress. It is important to note that this type of insurance does not provide liability coverage or protection for the home's contents. Once the construction is complete, you can shift your coverage to a standard homeowners policy.

Now, let's address the issue of getting your postcode recognised by insurers. Here are some steps you can take:

• Contact your local authority or Royal Mail's Address Management Centre: Notify your local authority about the new development, or contact Royal Mail's Address Management Centre directly. They will generate new postcodes for the area and update their postcode address file. However, it can take time for these changes to filter through to insurance companies and other businesses that use postcodes to verify customer details.
• Speak to a specialist insurance broker: If your postcode is not recognised by standard insurance companies, consider contacting a specialist insurance broker. They may have more flexibility in accommodating new postcodes and can help you find a suitable policy.
• Compare quotes from multiple insurers: Different insurers use their own systems for grouping postcodes, so the cheapest postcode for you may vary depending on the insurance provider. Compare quotes from several insurers to find the most affordable option for your new postcode.
• Provide detailed information: When providing your address, include as much detail as possible. If your postcode is new, you may need to provide the full address, including the nearest cross street or landmark. This can help insurers locate your address even if the postcode is not yet recognised.
• Contact the Insurance Ombudsman: If you are facing difficulties getting insurance due to an unrecognised postcode, you can threaten to or actually contact the Insurance Ombudsman. This organisation can help resolve complaints and ensure that insurance companies update their address files in a timely manner.
• Consider alternative options: If you are unable to get insurance due to your postcode, consider using the nearest recognised postcode or the address of a relative or friend who lives nearby. However, be cautious when providing an alternative address, as providing misleading information may invalidate your insurance.

By following these steps, you can increase the chances of getting your postcode recognised by insurers and obtaining the necessary coverage for your new build home.

Frequently asked questions