Most building contractors have their own home building insurance, to cover potential risks, damage and losses. Homeowners can also buy home builder’s insurance, but a homeowner’s policy will also cover many of these types of risks. It is a good idea to speak with several insurance companies, as well as your home builder and your loan officer before purchasing insurance for the construction period. It is sometimes advisable for owners to obtain either a home owner’s policy or a dwelling and fire policy. Home owner’s insurance or builder’s insurance is especially importance if the home is built on your lot, you are acting as your own contractor, you ordered a home completed to a shell, or if you are using a small builder.
Your home builder should carry home builders insurance. A home builder needs three types of coverage, builder’s risks, general liability and workers comp.
Builder’s risk insurance is designed to cover buildings while they are under construction. The policies are generally inexpensive because it covers an incomplete home. Builders risk insurance does not cover property, before the construction starts or after it is completed, only during construction.
There is little standardization between builder’s risk polices, so each policy varies in exactly what it covers. Generally builder’s risk insurance covers fire, theft vandalism, accidental losses, damage and other destruction of the property. Flood and earthquake coverage is usually an additional rider however. There is also additional coverage available to cover soft cost losses and profits for the builder. Homeowners can also purchase a builder’s risk policy, possibly for less than a homeowner’s policy.
General liability insurance covers property damage, bodily injury or other losses that occur as a result of the contractor’s work. General liability does not cover construction defects.
Workers compensation insurance protects workers who are injured on the job, covering medical care and even lost time from work. It is important that all the workers on your jobsite are covered by workers comp, whether by your general contractor or the general contractor.
Using a homeowner’s policy for construction can actually work well as long as you select a good homeowner’s policy. Most policies will cover losses, damage to property, fire, and also liability coverage against injury. It’s a good safeguard to start your homeowner’s insurance at the start of construction, just for the additional coverage, no matter what your home builder’s situation is. Once construction is complete, you will need to notify your insurance company, and have them assess the value of your completed structure. They should also be asked to insure your furnishings and other home contents.
Building a home without the right insurance is a huge and unnecessary risk. It is much better to have too much insurance rather than not enough in the event of an accident. Home building insurance takes many forms, and while your home builder should have insurance, it never hurts to have some of your own as well. For more information on home building insurance please download our 98 page book and read some of the other articles on this site.