Published May 17, 2021|2 min read
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Homeowners insurance covers your home and belongings from covered losses like fire, storm damage, and theft, but your coverage may be limited if your house is under construction or undergoing repairs. Most standard policies won’t cover theft of building materials or personal belongings to homes that are under construction. Coverage is also limited for newly constructed or renovated sections of your home.
To help fill this coverage gap, many insurers offer a policy endorsement called dwelling under construction coverage. This coverage is intended for home remodels or repairs that aren’t expected to last longer than a month or two. When added to your policy, your insurer will likely increase your insurance premium to account for heightened risk of theft and vandalism to homes that are under construction.
Homeowners insurance doesn’t cover theft or property damage to homes that are under construction
If you’re planning home repairs or renovations, you can add a dwelling under construction endorsement to your policy for an additional policy premium
Dwelling under construction coverage protects homes that are undergoing construction against losses like theft, fire, and storm damage. Building materials at the home and in transit are also covered
This endorsement is typically utilized as a “stop-gap” coverage to afford short-term flexibility for construction projects. For more extensive construction projects, you’ll need builders risk insurance
Simply put, dwelling under construction coverage is a provision that you can add onto your home insurance policy either during or in advance of a construction project on your home. 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 an extensive home remodel or renovation, check with your insurance company to see if this endorsement is necessary. A simple kitchen renovation or basement finishing project may not require any additional coverage. But adding a new section of home or remodeling the entire inside 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 few months, you’ll need coverage that’s intended for lengthy, extended repairs like builders risk insurance.
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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.
Dwelling under construction endorsements 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 - Dwelling under construction coverage also covers any building materials or tools on-site that are being used to construct or repair the house. This includes protection for materials or equipment in transit or stored at a temporary location
Premises liability - If a visitor is injured at the 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.
A homeowners insurance policy with dwelling under construction coverage has all of the same policy exclusions as standard home insurance, including water damage from flooding, earthquake damage, pest damage, and general wear and tear.
The cost of dwelling 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.