Building a custom home is a significant investment, and protecting that investment starts before construction begins. Understanding your insurance needs can help safeguard your property, manage potential risks, and prepare you for the unexpected.
River’s End Construction encourages homeowners to discuss insurance requirements early in the planning process. With the right coverage in place, you can move forward with greater confidence as your new home takes shape.
Why Insurance Matters During Construction
A home under construction faces risks that differ from those of an occupied home. Materials may be stored on-site, the structure may be exposed to the elements, and multiple contractors may be working on the property.
Appropriate insurance coverage can help protect your investment and address potential financial losses.
Here are three important reasons to review your coverage before construction begins:
1. Protect Your Investment
Insurance may help cover certain losses involving the structure, building materials, or other covered property if an unexpected event occurs.
2. Manage Construction Risks
Fire, severe weather, theft, and other incidents can create unexpected expenses or delays. The right policy can help reduce the financial impact of covered losses.
3. Meet Project Requirements
Construction lenders, contractors, and other parties may require specific insurance coverage before work begins. Confirming these requirements early can help prevent unnecessary delays.
Step 1: Review Your Existing Homeowners Insurance
Your current homeowners policy may not provide adequate coverage for a new home while it is under construction. Before work begins, contact your insurance agent to discuss your plans and determine what protection is needed.
Consider asking the following questions:
- Does my existing policy provide any coverage for a home under construction?
- Do I need a separate course of construction or builder’s risk policy?
- When should coverage begin, and when should it end?
- Are building materials, stored supplies, and materials in transit covered?
- What exclusions, deductibles, or coverage limits should I understand?
Your insurance provider can explain your existing coverage and identify any additional protection that may be necessary.
Step 2: Understand Course of Construction Insurance
Course of construction insurance, often called builder’s risk insurance, is designed to protect a building and certain construction materials against specified risks during the building process.
Depending on the policy, coverage may include:
- Damage to the structure: Protection against covered events such as fire, vandalism, or certain weather-related damage.
- Building materials: Coverage for eligible materials and supplies stored at the construction site or elsewhere, depending on the policy.
- Materials in transit: Coverage may be available for qualifying materials while being transported to the project.
- Other covered property: Certain temporary structures, equipment, or additional project-related items may be eligible for coverage.
Coverage varies by insurer and policy. Theft, water damage, earthquakes, floods, and other risks may be excluded or subject to specific limitations.
Work with your insurance agent to determine the appropriate coverage limits, deductibles, exclusions, and policy duration for your project. Also confirm who is responsible for obtaining the policy, as this can vary by construction contract.
Step 3: Verify Your Contractor’s Insurance
Before construction begins, it’s important to understand the insurance coverage maintained by your general contractor and the other parties involved in the project.
Ask your contractor about applicable coverage and request documentation as appropriate.
Common types of contractor insurance include:
General Liability Insurance
Generally provides coverage for certain third-party bodily injury and property damage claims, subject to policy terms and exclusions.
Workers’ Compensation Insurance
Provides benefits for eligible work-related injuries or illnesses as required by applicable law. Requirements and coverage depend on the employer and circumstances.
Additional Coverage or Bonds
Depending on the project, contract, or lender requirements, additional insurance or a surety bond may be relevant. A performance bond is different from an insurance policy and should not be assumed to be included in a contractor’s standard coverage.
River’s End Construction can discuss applicable insurance documentation and project requirements with you as part of the planning process.
Step 4: Confirm Subcontractor Coverage
Custom home construction often involves specialized trades, including electricians, plumbers, HVAC technicians, and other subcontractors. Understanding how these parties are insured is an important part of managing construction risk.
Before work begins, clarify how subcontractor insurance is addressed in the project arrangements.
Important considerations include:
- Confirming applicable liability and workers’ compensation coverage.
- Requesting certificates of insurance when appropriate.
- Understanding who is responsible for verifying coverage.
- Checking whether additional insured requirements apply to the project.
Clear communication about insurance responsibilities can help reduce coverage gaps and misunderstandings during construction.
Step 5: Prepare for Completion and Occupancy
As construction nears completion, you’ll need to coordinate the transition from construction-related coverage to an appropriate homeowners insurance policy.
Contact your insurance provider well before the expected completion date. Waiting until the last minute may create unnecessary complications, particularly if a lender or other party requires proof of coverage before occupancy.
Your insurer may request information such as:
- The anticipated completion and occupancy dates.
- The home’s square footage, construction type, and features.
- The estimated or final replacement cost.
- Details about heating systems, roofing materials, and other property characteristics.
- An inspection, appraisal, or other documentation, if required.
Confirm the effective date of your homeowners policy and the appropriate end date for your construction coverage. Avoid allowing one policy to expire before the necessary replacement coverage is in place.
Additional Coverage to Consider
Your location, property characteristics, and financing arrangements may affect which additional insurance policies are appropriate.
Flood Insurance
Standard homeowners policies generally do not cover flood damage. Separate coverage may be worth considering based on your property’s flood exposure and insurance requirements.
Earthquake Insurance
Earthquake damage is generally excluded from standard homeowners policies. Ask your insurer about available coverage and any applicable deductibles or limitations.
Temporary Living Expenses
If your current home becomes unavailable or your plans require temporary accommodation, ask your insurer what coverage, if any, may apply. Coverage for temporary living expenses is subject to the terms of the applicable policy and may not cover every construction delay.
Your insurance agent can help assess your circumstances and explain which options are appropriate for your property.
Frequently Asked Questions About Construction Insurance
1. Do I need insurance while my custom home is being built?
Appropriate coverage is important during construction. The specific policies you need depend on the project, construction contract, lender requirements, and existing insurance arrangements. Discuss your situation with your insurance provider before work begins.
2. Who is responsible for purchasing course of construction insurance?
Responsibility can vary. The homeowner, builder, or another party may arrange coverage depending on the contract and project requirements. Confirm who will obtain the policy and verify that the coverage is in place before construction starts.
3. Does my contractor’s insurance cover my new home?
Not necessarily. A contractor’s general liability policy is not a substitute for course of construction coverage on the building itself. Ask your insurance agent and contractor to clarify how the project, property, and parties involved are covered.
4. Are building materials covered if they are stolen or damaged?
They may be, depending on the policy, where the materials are stored, and the circumstances of the loss. Review coverage limits, exclusions, and any requirements for securing or storing materials.
5. When should I arrange homeowners insurance for my new home?
Contact your insurer well before the home is completed. This allows time to provide the required property information and coordinate coverage with your lender and the end of your construction policy.
6. Can River’s End Construction help me understand my insurance requirements?
River’s End Construction can discuss project-related requirements and help clarify construction scheduling and coordination needs. Your insurance agent is the appropriate professional to determine coverage, explain exclusions, and recommend policies for your circumstances.
Build With Confidence
Planning a custom home involves many important decisions, and insurance is one of them. Addressing coverage early can help protect your investment and reduce uncertainty throughout the construction process.
River’s End Construction is committed to quality workmanship, clear communication, and careful project coordination from the initial planning stages through completion.
Planning a custom home? Contact River’s End Construction to discuss your project and learn more about preparing for a successful build.
River’s End Construction Inc. — Built on Quality. Designed for Life.