Do I need homeowners insurance during construction?
You might need additional home insurance coverage or an entirely separate insurance policy while your home is under construction, though it all depends on how large of a project you’re undertaking and the type of insurance coverage your contractor or builder provides. The two main types of insurance during construction that you might want to consider are home under construction insurance and builders risk insurance.
Home under construction insurance vs. builders risk insurance
Home under construction insurance | Builders risk insurance | |
|---|---|---|
What it is | An endorsement you can add to your standard home insurance policy to ensure you’re fully protected while your home is under construction | An entirely separate insurance policy that’s either purchased by you or your contractor prior to the start of construction |
When it’s necessary | Short-term construction projects, like adding a new room to your home or remodeling your kitchen | New construction homes or long-term construction projects, like renovations or repairs that are expected to last longer than a month or two |
What’s covered | Fire, storm damage, burst pipes, theft, & other covered perils — plus soft costs associated with construction delays, building materials, & premises liability | Your home and construction materials from fire, vandalism, storm damage, theft, & other covered perils — but not liability |
How much it costs | Varies based on the scope of the project | Varies based on the scope of the project |
Home under construction insurance
Also known as a dwelling under construction endorsement, home under construction insurance is a home insurance coverage add-on designed for home construction projects that aren't expected to take longer than a month or two. Your standard policy coverage won’t cover burglary or updates to your house if it’s considered to be under construction.
If you’re planning a home remodel or renovation, check with your insurance company to see if this endorsement is necessary. Adding a new room to your home or remodeling the entire kitchen might be viewed as a construction project to your insurer, especially if you need to stay somewhere else during the project.
Keep in mind that this endorsement is not for long-term construction projects. If the renovations or repairs are expected to last longer than a month or two, you’ll need coverage that’s intended for lengthy, extended repairs like builders risk insurance.
What is covered by home under construction insurance?
This coverage is designed to cover homes under construction in the same way that a standard policy covers completed homes. With dwelling under construction coverage, your home is covered against things like fire, storm damage, burst pipes, theft, and other covered perils while it’s under construction.
Home under construction insurance also typically include special coverages to protect against losses that are unique to construction projects, including:
Soft costs: If the construction is delayed due to a covered loss, this endorsement will cover the “soft costs” associated with the project. Soft costs include licensing and permit fees, interest on the construction loan, and other costs that are caused by the project’s delay.
Building materials and supplies: Covers any building materials or tools on-site that are being used to construct or repair the house, including protection for materials or equipment in transit or stored at a temporary location.
Premises liability: If a visitor is injured at your home during the course of construction, this coverage can pay for any potential medical or legal expenses arising from the incident.
Keep in mind that in order to be covered by this policy endorsement, the construction project needs to be carried out by a licensed builder. If you file a claim for damages and your insurer discovers that you used an unlicensed contractor, your claim will likely be denied.
How much does home under construction insurance cost?
The cost of home under construction coverage will depend on the scope of the project, the materials being used, and the project’s duration. In general, you’ll pay progressively more in premiums as the project progresses and you add more square footage, install flooring and appliances, and other factors that increase the rebuild value of your home.
Builders risk insurance
Builders risk insurance is designed to provide coverage if you’re building a new construction home or making extensive renovations to your home that will take months on end. Entirely separate from home insurance, whether you or your contractor is responsible for purchasing this policy will depend on the terms of your construction contract.
Builders risk policies are typically offered in three, six, nine, or twelve month contracts. The length of your policy term will depend on how extensive your construction project is and how long it’s expected to take.
→ Take a deeper dive into builders risk insurance
What is covered by builders risk insurance?
Builders risk insurance covers the construction of your home, any additional structures on site, and construction materials from fire, wind, lightning, hail, theft, vandalism, and explosions. Unlike dwelling under construction insurance, builders risk insurance doesn’t include liability coverage. Instead, your contractor or builder likely has general liability insurance to cover any issues that may arise during the build.
How much does builders risk insurance cost?
The cost of builders risk insurance will vary widely based on location, the type of construction project you’re undertaking, construction materials, and how long the project is expected to take. In general, builders risk insurance in an area that’s at high risk of tornadoes, hurricanes, or wildfires will likely cost more than a policy for a construction project in a more mild location. Likewise, major remodels and projects with high-quality materials will likely lead to higher insurance premiums.
Frequently asked questions
Which type of insurance will cover the structure during construction?
Builders risk insurance covers the structure of your home during construction, but this type of coverage varies based on the specific situation. Depending on the type of work you are having done, the coverage may be known by a few different names, including course of construction insurance and special inland marine insurance.
What does construction mean in insurance?
When it comes to your homeowners insurance, construction refers to the process of building a home or other structure. Builders risk insurance protects your property from theft, fire, vandalism, and storm damage while it is under construction.
How is builders risk insurance calculated?
Rates for builders risk insurance are calculated based on several factors, such as location, construction type, how much coverage you choose, and what type of construction is being done. But each insurance company has a different approach to setting rates, so you could get wildly different quotes for the exact same coverage from multiple companies. This is why it is so important to compare quotes from multiple companies.
Does home insurance cover DIY?
While it is possible your home insurance might cover some damage related to DIY construction or repairs, it isn’t very likely. Most insurance companies have limitations and exclusions on what they will cover. Read your policy carefully and check with your insurance company to find out exactly what is (and isn’t) covered by your homeowners insurance.
