New construction has plenty of perks – you get to customize your home and have it built just the way you want it, and you’ll never have to wonder what kind of DIY work a previous owner might have done.
Along with the perks come some special insurance needs. While being constructed, your home presents some specific liability risks and well as presenting the problem of being an unoccupied residence. That means it needs special coverage while under construction, and a regular homeowner’s policy as soon as it’s complete.
The Basics of Home Insurance for New Builds
During construction of a new home, there is a special type of policy that needs to be in place. If the home is being built by a builder, that company will carry their own insurance, called builder’s risk. As a general rule, that should be enough coverage to protect the building materials on site and also provide liability insurance. You will need to arrange homeowner’s insurance to be in force upon completion. Bear in mind that the builder’s coverage does not extend to you – if you are personally found liable for an injury, you will need your own coverage.
If you currently own a home, you will probably be able to extend the liability coverage to the new home during construction to work with the builder’s coverage and protect you personally.
If you do not own a home, have hired your contractor directly, or are building the house yourself, you will need to get it insured. A course of construction policy is designed to provide coverage similar to a builder’s risk (some companies still call it builder’s risk). With the right endorsements, it covers liability as well as construction materials and other property on the site being installed in the house, such as new appliances and light fixtures.
In most cases, a single policy is issued – it’s a homeowner’s policy that is a course of construction for a certain period of time and coverts to traditional homeowners when the construction is complete. The time period allowed for construction to be complete varies, and it may be anywhere from 6-12 months.
A separate course of construction policy may also be available, after which you will need to take out a new homeowner’s policy – but that is less common.
Specifics of Home Insurance for New Builds
If you are responsible for providing the insurance yourself, it is important to understand what coverage you need.
Premises Liability – This provides protection against any injuries or damages that might occur on the property. For example, if you stop by the construction site with a friend to see how it’s going, and your friend falls and is injured, premises liability will cover you.
Building Materials Coverage – This will pay for any building materials not yet installed in the new home in the event of theft or loss due to weather, fire, or other risks. Endorsements may also cover materials in transit to the construction site.
Structure Coverage – This main coverage protects you from theft or damage to the home itself and anything already installed in the home. That includes protection from theft, vandalism, fire, and more.
We approached our selection as a homeowner who is responsible for providing their own course of construction insurance since this particular review is not focused on commercial builder’s risk insurance. In order to get some insight, we spent some time perusing online forums where insurance coverage for new home build was the topic of discussion. This helped us get the customer experience with obtaining this sort of insurance.
We chose companies that allow a seamless and simple transition between the course of construction and standard homeowners insurance since the last thing a new home buyer needs is an extra step to remember.
As always, all of our top picks have a good reputation for both customer service and claims, and they all write comprehensive policies to keep you protected in full. While there are some great regional companies out there, we chose companies that serve the majority if not all states to make sure our recommendations are useful to the largest possible group of people.
Finally, we looked for good rates both during and after construction – including insurance companies that offer a new construction discount.
Our Top Recommendations
These three insurance companies will see you through construction and seamless transition you into living in your new home.
Allstate provides course of construction coverage for new homes that transitions into a solid and comprehensive homeowners insurance, and their captive agent system means you will have a person to talk to every step of the way who really knows the products.
The company is rated well for customer service, and also offer some of the best discounts around, including a 10% rate reduction for newly constructed homes; if you’re a new Allstate customer, you’ll pull an additional 10% off for the first two policy years. These discounts are on top of rates that are often surprisingly competitive for an agent-driven company.
The biggest name in personal insurance nationwide is, not surprisingly, there for you during new construction. They are the name most mentioned on forums discussing the topic of where to insure a new construction home, which gives us the thumbs up straight from customers in that particular situation.
State Farm again gives you an agent to talk you through the process, and they will transition you to the homeowner’s insurance chosen by more people in the nation than any other company. Although we did not see a specific new home discount, they do offer some unusual ones, including one for roofing materials.
Liberty Mutual has an excellent homeowner’s program that provides comprehensive and customizable coverage, including the option to cover a home under construction. Once your home is built, you can enjoy a long list of discounts, including one for new construction.
Liberty Mutual performs well in our rate tests and generally fares positively in terms of consumer reviews, so once your house is complete you can enjoy peace of mind. Plus, Liberty Mutual offers not only the option to bundle your auto directly but a discount program with Geico as well.
Shopping for Home Insurance for New Builds
The best place to start when shopping for new construction insurance is to check in with your current insurance company. If you already have a homeowners policy, they may be able to extend some coverage to the new build (liability, as mentioned above). If you need to get the entire construction project covered with a new policy, though, or do not have homeowners currently, you will need to ask for a quote.
Before you get started, talk to your builder or contractor and make sure you understand clearly which risks are on you to get covered. Do not assume that your builder has everything taken care of; it could be an expensive mistake.
When getting quotes, ask what kind of discounts the company offers on new construction. Many insurers will give you a break on your rate thanks to the nature of a newly constructed house in which everything is, presumably, in tip-top shape.
Finally, ask how and when the coverage transitions to regular homeowners, and what you need to do to make sure that change occurs. Once you are ready to move into the home, you need to make sure things like your personal property are insured, which means you need a proper homeowners package policy.
The Bottom Line
Building a new home is exciting, but the insurance side of things can get a bit confusing. Take the time to talk to everyone involved, including the builder, the contractor, your insurance company, and possibly even the lender handling the financing. This way you can make sure every angle is covered and focus on the plans for moving into your brand new house.
For a list of companies that we recommend, visit our Best Insurance Companies page.