Do I Need Insurance to Build a House?
Risks are present during construction of a house. Some of these risks are similar to those for an existing house. Fire can destroy a partially built house, and materials can be stolen from the site. Some risks, like liability, are greater during construction of a house. When construction is in progress, accidents can occur even with diligent oversight. A home under construction can and should be protected by insurance.
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Builder's Risk Insurance
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Builder's risk insurance is a specialized type of property insurance. It is initiated to cover builders or property owners during the house construction phase. It covers structures and other aspects of the house under construction, such as appliances and materials that might get stolen from the job site, as well as vandalism. It usually excludes coverage for construction equipment and tools. These are usually covered by the builder. It also shields the owner and/or builder against liability in the event someone visiting the property is injured. Many insurance companies offer the option of converting the builder's risk insurance to a regular homeowner's insurance policy once the house is certified for occupancy. The policy owner can also simply cancel the policy after construction is complete.
Homeowners Insurance
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A different way to cover a new house during its construction is to purchase a standard homeowners policy. The homeowners insurance policy can provide coverage in the event of peril, such as a fire. It can also provide coverage against liability. As an example, in the event you were walking a friend through your house under construction, and the friend was injured and brought suit against you, liability insurance would be good to have. Until the structure can be locked and secured, personal property in the structure is not likely to be covered.
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Dwelling and Liability Only
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You may be able to purchase a limited policy that coverage dwelling and liability only. It is important to re-evaluate this coverage as soon as construction is complete. This is especially true if you have revised your original plans for the house and made modifications. Upgrades will need to be added to the overall homeowners insurance when the house is finished and ready to occupy.
Tagging Onto the Contractor's Insurance
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If you own the building lot, you may be hiring a contractor to do the building. In some instances, the contractor will have an insurance policy that protects her against liability. The contractor may be able to add you to that policy as an additional insured person. Since a passerby who is injured on the property during construction could sue the contractor, you or both, being insured together on this type insurance could make sense. As the owner of the property, you should also consider that the contractor's policy may not cover liabilities or injuries related to subcontractors. These individuals may work on the site, but not for the contractor's company. Whatever insurance you have, consider providing coverage against these risks.
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References
- Photo Credit New House Construction image by tim elliott from Fotolia.com
