Few times in life are you going to have to make so many decisions as you do when you’re building a house from the ground up. What floor plan do you want? Which contractor should you hire? Brick or wood siding? Brushed gold or brass colored kitchen hardware? The decisions are endless…
But one of the most important decisions you need to make is about your homeowners insurance. Insurance during new home construction is a bit different than homeowners insurance on a completely constructed dwelling. You may be asking yourself - Do I need home insurance when my house is still under construction?
The answer is YES. Just because your house isn’t finished yet doesn’t mean you don’t need to insure it. You have a great deal of money invested in this property, and you have a great deal of risk, too. You will still need to get insurance while your home is being built, but it’s not the same kind of insurance that you typically get on a home. A traditional homeowners insurance policy has additional coverage for theft of personal property – something you likely don’t need when you’re building a home.
Builder’s risk insurance coverage is what you need to purchase. This allows for coverage to be in place if something happens to the framing of the house, or other parts along the scheduled build. Some insurance companies may offer a builder’s risk as a separate policy, but others may offer it as an endorsement to a homeowners policy. Alfa® offers builder’s risk as an endorsement to the homeowners policy, making it simple to transition to just a homeowners policy once the build is complete. Talk with your agent about this to better understand your policy needs.
What is builders risk insurance?
There are many different types of builders risk insurance policies, but they all serve the purpose of protecting buildings while they’re under construction. Builders risk insurance is meant to help cover loss and damage at a construction site, which in turn, can help protect your investment should a tragedy strike.
When to get builders risk insurance?
If you’re wondering when a builders risk insurance policy should start, it’s before construction even begins. It is best to have a policy in place before the hammer hits the first nail. It is a misconceived notion that insurance is not needed until you are living in the home. The last thing a family needs to worry about when building a new home is what they would do if the structure was messed up while the build was still going on.
Who is responsible for a builders risk policy?
Don’t assume your builder will have all the insurance needed to protect your property. You, as the property owner, will need to get coverage for your property while it is under construction. This will cover the structure should it need repairing or replacing after a loss due to a covered peril. Your contractor’s insurance generally does not cover things like hurricanes, tornadoes, fire, and other natural disasters. Your agent can assist you in determining the best coverage to suit your needs.
What is included in a builders risk policy?
Each insurance company and policy varies, so you will need to determine what policy meets your needs. It is common for builders risk policies to only include coverage for construction; however, it’s very important that you find liability coverage, too, whether you find a builders risk policy that includes liability coverage or get a stand-alone liability policy.
Imagine bringing your mother-in-law to check out the progress on the new house. While on your property, she trips over a step and breaks her arm. Who’s responsible for that risk? You are. Or what happens if a neighborhood child walks onto your newly laid slab and gets a nail in his foot (or something worse happens)? You could be facing hefty medical bills and maybe even a lawsuit, and liability coverage could help cover those costs.
Alfa’s builders risk endorsement has limited coverage for the theft of materials or supplies that are owned by someone other than the insured. There is also a builders risk theft endorsement that gives theft coverage for a dwelling under construction, but the dwelling must be to a point where it is fully enclosed and capable of being locked.
Once a build has been completed, the builders risk policy can be changed to a regular homeowners policy for coverage to the completed dwelling and belongings. Your Alfa® agent can answer any questions you may have about insurance during the home-building process. Call today and get a free quote!