Home Building Insurance

If you’re planning on building your own home rather than purchasing an existing house, you will likely need home-building insurance during the initial phases of your project. This type of coverage is different from homeowners insurance but can still help safeguard your future home from theft, weather-related damage and other types of liability. You will only need home-building insurance while your house is being constructed because it does not cover losses or damages that occur before or after the project is in motion. Home-building insurance is meant to protect you as the homeowner from financial loss while you are building your dream home.

What is Home-Building Insurance?

If you’ve ever supervised or undertaken a major construction project, you might already know that construction timelines rarely go as originally planned. It’s important to protect everything from building materials and equipment to the unfinished structure while you are in the process of constructing the dwelling. 

Home-building insurance is a type of insurance coverage that can help ensure the building process goes smoothly — even if unexpected setbacks arise. It helps compensate you for losses that occur while you are in the process of building your home. For example, if your property is vandalized during the build, home-building insurance can cover the cost to repair the damage and restore the structure to the previous place in the timeline before the damage occurred. 

You may sometimes hear home-building insurance referred to as new home under construction insurance to differentiate it from homeowners insurance. Homeowners insurance provides coverage after the project is complete and livable — not while it is still under construction. While both types of insurance provide similar protections (including coverage for the structure of the dwelling and legal liabilities), they are both necessary protections at different stages of the home-building process.

You can customize your policy to make sure all of the risks for your particular project will be covered. Because it’s usually a good idea to err on the side of caution when it comes to extensive and costly ventures, new property under construction insurance providers usually also offer umbrella insurance extensions. This insurance extends your liability and property damage insurance and can be essential for higher-value sites or homes with particular liabilities that might cause more expensive damages. 

What Does Home-Building Insurance Cover?

A variety of different home-building insurance policies are available, and it can be difficult to decide what will work best for you. Most insurance companies will allow you to update your coverage as the construction progresses, allowing you to shift protections to keep you covered during particular stages of your project. 

Home-building insurance policies, like homeowners insurance policies, include multiple protections. Some of the coverages you’ll find under most home-building insurance policies include:

• General liability: Liability coverage will help you cover some of the costs of legal expenses if someone is injured on your building site. In some cases, liability insurance is required to begin construction from the lender or a third party as additional protection.
• Stolen and damaged equipment: Your liability insurance doesn’t only include medical injuries that occur on your property — it can also extend to any damaged or stolen equipment. For example, if you hire an outside contractor to install a portion of your foundation and you damage his tool accidentally, the contractor may sue you for the cost of a replacement. Your home-building insurance may help cover the cost of any court-ordered replacement expenses. 
• Physical structure: Home-building insurance also extends to the physical dwelling and structure of your home and other structures on your property during the construction process. For example, if a pipe explodes during construction and destroys a portion of your new plumbing system, your home-building insurance may cover the cost of a replacement depending on what caused the explosion. 

Like a homeowners insurance policy, home-building insurance policies include a list of covered perils that determine when you can and cannot use your benefits. In order to claim a reimbursement for damage, it must be caused by a covered peril listed on your policy. Some common examples of covered perils include: 

• Fire 
• Hail 
• Lightning 
• Theft and vandalism 
• Vehicle collision 

Even the best home-building insurance policy won’t cover everything. Home-building insurance is not a replacement for contractor’s insurance and will not cover damage that is determined to be the result of a mistake or improper installation made by a professional you hire. Many home-building insurance policies also include exclusions for damage caused by earthquakes, flooding and other types of natural disasters. 

What Does Your Contractor Cover?

While you will always need home-building insurance when constructing a new house, your contractor will also need insurance coverage of their own. Home-building insurance is coverage for your investment as a homeowner and protects only you from unforeseeable and unavoidable expenses. If you begin building a dwelling that is struck by lightning and damaged, your building insurance can cover the cost you would incur if you had to rebuy the materials on your own. 

Home-building insurance does not cover damage (intentional or not) deemed to be the fault of your contractor. In the example above, your insurance company may send an adjuster to your home to determine the cause of the lightning strike before agreeing to a payout. If they discover that the damage was caused because your contractor failed to use proper safety precautions when setting up lightning rods, insurance may deny you coverage. Your recourse in this circumstance would be to sue your contractor, whose bonding and insurance would help provide your payout. Instances like these are part of the reason it’s important to work only with bonded and insured contractors and businesses. 

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