Insuring a New Home During Construction

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While the house of your dreams is being built, you should insure the structure and its contents. If you don't, you'll be exposed to unnecessary risks like fire or adverse weather that could damage or destroy your partially completed home. You should also protect yourself from liability by verifying that the people building your home carry proper insurance coverage.

You can insure your new home during construction with a homeowner’s policy

One way to protect your new home during construction is to purchase a standard homeowners policy. This will cover any damage to your new house as it's being built. The time to insure your new home is before construction begins. Although it may seem a little odd to buy insurance protection for a structure that's still in the blueprint stage, remember that your house is vulnerable to damage during every phase of construction. For a time, you may need to carry one homeowner’s policy for your new home and another for your old home.

There are temporary policies available that escalate the coverage amount as the construction progresses. Be sure to purchase full homeowners coverage after the home is completed.

Liability and theft coverage are provided

A homeowner’s policy for your new house also provides you with liability coverage in case someone has a mishap while visiting the new home site. For example, if one of your friends trips during a tour of your dream house, his or her injuries may be covered.

In addition, your policy provides coverage for the theft of building supplies, such as carpets, lumber, and roofing shingles (although your homeowner’s policy at your old house may also provide theft coverage at your new home). Uninstalled finished products like ceiling fans and the kitchen sink, however, are generally covered by your contractor's insurance.

Keep in mind that your policy will not cover your personal property at your new house until the building is secure and lockable.

A dwelling and fire policy is another option

Another option apart from standard homeowners insurance is to purchase a dwelling and fire policy. This type of policy can be purchased in comprehensive form, with property, liability, and theft coverage included. Or, you can buy a policy that covers only damage to the physical structure of your new home. A dwelling and fire policy may be a wise choice during construction of your new house if you have a standard homeowner’s policy on your old house that covers liability and the theft of items at the construction site.

Workers' compensation coverage

Whenever a contractor or subcontractor steps onto your property to work on your house, you face the risk that someone may get injured and hold you liable. You can protect yourself from a potential lawsuit by verifying that the contractor and subcontractors have workers' compensation insurance. Ask to see proof. Get a copy of your contractor's certificate of coverage for both workers' compensation and contractor's liability insurance (which covers miscellaneous damage to your house by the contractor). All subcontractors should also make these documents available. You would be wise to call your contractor's and all subcontractors' insurance carriers to verify the information. Consult your insurance agent to be certain that the amount of workers' compensation is adequate and that the certificates are active. All general contractors should carry proper coverage for their employees, but you may need to extend the liability portion of your homeowner’s policy to cover underinsured subcontractors.

What if you're the boss?

Some do-it-yourself homeowners do most of the construction work on their homes by themselves, with a little help from their friends and family members. Other owners act as the general contractor and hire subcontractors to do the actual work. If you're building your own home, a homeowner’s policy covering the new home site will generally cover any injuries incurred by your friends and family members. If you are the general contractor, you are required by the laws of most states to carry a certain level of workers' compensation insurance to protect the people who build your new house.

Re-evaluate your coverage when construction is complete

Once the building is complete, you should re-evaluate your homeowner’s insurance coverage. If you opted for dwelling and fire coverage, you will need to purchase a full homeowners policy. If you bought standard homeowners insurance, make sure that you have purchased the right amount, especially if you have made alterations to the original building plan. For instance, if you added an extra bathroom, you'll probably need to raise the amount of your coverage.

See this article in Resource Center: Insuring a New Home During Construction

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