Building Insurance Vs. Home Insurance: How Are They Different
Building a new home from the ground up is one of life’s most exciting endeavors. However, who is to be held responsible if something goes wrong during construction? It depends on who owns the actual land and the nature of the problem. It’s rare for a construction project to go exactly as planned, so it makes sense to prepare for nuances and purchase the appropriate insurance.
Insurance for Building a New Home
If you own the land for your new home, you need special liability insurance coverage known as a “course of construction policy” in case a crew member gets injured on the job. It’s similar to a “builder’s risk policy,” which a contractor should purchase if the future homeowner does not own the land. A course of construction policy covers construction materials and property on the site in addition to liability for injuries. It covers the time frame of the home’s construction then converts to a traditional homeowners policy when the project is completed. The terms for coverage during the building process usually last 6 to 12 months. Ideally, you own the land and structure on it without third parties having any legal claims to the property.
Is Home Insurance for a New Building Essential?
Yes, you will need home insurance on a new building project, but only if you own the land outrightly. If not, the construction company is responsible and liable for whatever happens on the site. Nonetheless, keep in mind there are various types of insurance coverage that apply to homes under construction. Some of these coverage types include:
- Premises Liability – Pays for injuries or damages that happen on the property while the home is under construction.
- Building Materials Coverage – Covers new building materials that haven’t been installed yet
- Structure Coverage – Covers the structure of the new home and its contents, protecting against vandalism, theft, and other risks.
Different variables affect the pricing of insurance policies, as each new home has its own set of expenses. Building materials can make a significant difference in insurance rates, as brick is more resistant to fire and other disasters compared with wood —the stronger the material, the lower the insurance rate.
When Is the Right Time to Shop for Home Insurance for a New Building?
One of the worst mistakes involved with new home building is when the future homeowner rushes into an insurance plan. Before deciding on a home-building project, do your research on whether the math adds up in your favor. Find out what insurance costs will be during and after construction, then decide if it’s all worth it.
Find out if the land you seek to buy is even insurable. Some insurance companies simply won’t insure certain areas if they are prone to earthquakes or flooding. Others simply charge astronomical rates for properties in high-risk zones.
Is Building Insurance the Same as Home Insurance?
No, building insurance is not the same as home insurance. While home insurance covers existing homes, building insurance provides financial protection for a new project while it’s being built.
When you decide to build the home of your dreams, make sure you have an appropriate insurance plan to go with it. Contact us at Little & Sons Insurance Services for more information about getting the right insurance, whether you’re building a new home or buying an existing one. Selecting the right coverage will help you enjoy your new residence with a greater sense of ease and comfort.