Whether you’re building a new home or renovating an existing one, you should make sure your investment is properly protected throughout the construction or home-improvement process.
The type of insurance coverage you’ll need will depend on the scope of the project. A home you’re constructing from the ground up won’t be properly covered by standard homeowners insurance, whereas a simple home-improvement project may only require a few tweaks to your existing policy.
If you’re currently planning to build a new home, you are well aware that identifying the right contractor or choosing cabinets for the kitchen are not the only challenges. Securing adequate insurance coverage is critical while building a new home. Keep in mind that homes are under construction can be victim to bad weather and theft just like finished homes. Therefore, you should make sure the following are fully covered:
This is where builders risk insurance comes in. This type of insurance covers property owners and general contractors for projects under construction, renovation, or repair.
In some cases, a general contractor or custom builder will purchase builders risk insurance, since they have professional knowledge of the risks that the project involves and the building materials that require insurance coverage. But you as the owner might be responsible for purchasing builders risk insurance and ensuring the project is properly covered from start to finish, depending on the terms of the contract with the builder. Be sure to examine your builder’s contract and discuss any potential insurance obligations that you may have. Even if your builder has purchased builders risk insurance, the coverage could be inadequate. Make sure your contractor has liability and workers’ compensation coverage, and review any additional insurance needs with your insurance agent.
Keep in mind that a builders risk insurance policy does not cover losses that occur prior to construction or after the completion of the project. Before closing on your newly constructed house, make sure you obtain homeowners insurance.
Let your insurance agent know before you renovate or build an addition to an existing structure. Your agent can help to double-check that you’re adequately covered throughout the entire process.
Your specific insurance needs will depend on the scope of the remodel and whether or not the residence is occupied throughout the project. Many insurance companies offer endorsements for homes under construction as an add-on to your homeowners insurance — non-standard coverage for injuries or accidents related to renovations.
If you plan on living in a different location during renovations, a standard homeowners insurance policy may not cover property damage or accidents that occur while the home is unoccupied. Ask you insurance agent about a vacant or unoccupied home insurance endorsement or policy, which might be a wise option before your temporary move.
Additionally, you may want to review your personal umbrella policy (or consider adding one) for additional liability protection. Construction increases the risk of injury. Even if you purchase building risk insurance, an umbrella policy can protect you and your family by paying claims that exceed the liability limits of your existing homeowners policy. For more information on personal liability and how a umbrella policy works, see our previous article High-net-worth households need personal umbrella insurance.
Regardless of the scope of your home construction project, be sure to understand your insurance needs and acquire the right coverage before construction begins. If an incident occurs, you won't want to find that your safety net was full of holes.
Even if construction is months away, it’s worthwhile to review your existing homeowners policy immediately. Contact us today to review your existing coverage and discuss your insurance needs.
As a Personal Insurance Consultant, Scott helps clients meet their personal insurance goals by thoroughly reviewing their current risk exposures and advising them on gaps in coverage.
As a Personal Insurance Consultant, Scott helps clients meet their personal insurance goals by thoroughly reviewing their current risk exposures and advising them on gaps in coverage. Once these potential short falls in coverage are identified, Scott will recommend solutions through a consultative approach, helping clients not only cover these risk exposures, but help them gain a broad understanding of what their insurance coverage can do for them. He has helped clients with personal insurance needs for 10 years, in all 50 states, and specializes in working with the complex situations of affluent clients.
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