Do You Need Homeowner’s Insurance for New Construction Homes?
Having a new home built is exciting. But, if you don’t have the right protection, it can be very costly too. You’ll have different homeowner’s insurance needs than if you were to buy an existing home. In that case, you wouldn’t need insurance until you take possession of the house.
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Having a home built includes different risks. No one ones the home while it’s being built, if something goes wrong or something gets stolen, someone has to pay. Here’s how to protect yourself in this situation.
Building a Cookie Cutter Home
If a major builder is building your home amongst many others in the neighborhood, you probably don’t need homeowner’s insurance just yet. You don’t own anything so there’s nothing to insure. In this case, you don’t own the home until it’s complete and livable. Once the lender gives the approval that financing can go through, you’ll close on the loan. At this point, you’ll need insurance to protect your home and belongings.
Building a Custom Home
Building a custom home may have some different requirements/needs. It all boils down to whether you own the land or not. If you own the land, you need insurance. If you don’t own the land, yet you hired the general contractor to do the work, you’ll have to discuss your insurance needs with him.
Understanding Builder’s Risk Insurance
When your home is under construction, many things could go wrong. The roof could collapse, a worker could get hurt, or items could get stolen. You need insurance protection for all of these things. Usually, they are covered under the builder’s risk insurance. Any type of theft or vandalism is usually covered. This may include theft of the builder’s tools and materials that are needed to build the house. This insurance does not cover any of your personal belongings. Since you don’t own the house yet, though, there probably won’t be any personal belongings in the home.
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Who Pays for Builder’s Risk Insurance?
Here’s where it gets tough. Technically, the builder should pay for the builder’s risk insurance. But, if you own the land or they put it in your contract that you are responsible, then you’ll have to pay for it. Even if the builder does have insurance, if it’s not adequate, you may want to supplement it in order to protect yourself if you already own the land and/or the home.
The best way to determine the type of coverage is to get a copy of the builder’s insurance or the certificate of insurance. You’ll want to make sure the builder has comprehensive insurance with enough coverage for any type of liability. Think of the worst-case scenario – someone falls and gets seriously injured while working on your home. Without proper insurance coverage, you may be liable for the damages.
Builder’s insurance covers the builder and anyone in the home during construction, but oftentimes it goes as long as 3 years after construction. This may protect against any type of shoddy construction work that causes damages to the home down the road.
Obtaining Homeowner’s Insurance
If you own the land, you’ll also want homeowner’s insurance. What if a natural disaster occurs and your home is knocked to the ground? You need insurance that will cover the damages and help you pay to build it again.
Your own policy can also help in the face of liability. This should be in addition to what the builder already has, even if you think it’s sufficient. You cannot predict any damages that may occur or how much they will cost. It’s always better to be safe rather than sorry.
Before you build a home, it’s important to discuss your homeowner’s insurance needs with everyone involved. Make sure the builder is transparent in the coverage he provides. Ask for proof of the coverage so that you can make sure it’s adequate and covers you for as long as you need in the insurance. Talking with an insurance agent can also help you understand your liabilities and the types of coverage you have at your disposal to make sure you are protected in the event that anything goes wrong.
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