While home insurance is an unavoidable expense, many people don’t give it much thought until they have to make a claim. This is particularly true when it comes to owners that are building a custom home. It’s a fact that your contractor will have insurance to cover liability and damages, you will still need to have a policy on your home as it is built.
Building a custom home is a huge project and a large financial investment. You want to make sure that you are properly protected on all sides before you begin your build. Adding insurance to your home site and protecting your investment as it becomes a home can save you a bundle if there are any critical issues.
Homeowner’s insurance can be confusing for new buyers or builders. It’s important to know what coverage you need and how your policy protects you before you start to build. Let’s take a look at a few insurance tips for owners that are building a custom home.
Make Sure You Can Get Coverage
The worst mistake you can make is assuming that your build will qualify for coverage. There may be unforeseen circumstances that would prevent your insurance company from issuing you a policy. Talk to your insurance broker about your building plans, the details of your land purchase, and whether or not your property will qualify for coverage. If you can’t get a policy you could end up having a specialty policy to get the protection that you need and pay extremely high deductibles.
Build Coverage Costs
The good news is that when you build your custom home, you can expect to pay less on your insurance premiums than if you were to purchase an existing home. In some cases, you can expect to save over 80% on your insurance in the first decade that you own your home. Insurance companies love to cover new homes due to their limited need for claims when all the systems in the home are newly installed.
Your contractor will have their own insurance that will protect your home to a point. While the policy will cover any damages or liability for injuries during your project, the policy is designed to protect the builder and not you. It’s important that you have your own policy to protect your land and any personal property that is present during the build. Talk to your broker about getting a Course of Construction policy that will protect your home from damages while it is being built.
Actual Cash Value
Homeowners should beware of Actual Cash Value policies that are offered by some companies. While these policies can be tempting to enroll with due to their low premiums, you should understand what kind of protection you are getting. For example, if your partially constructed home burns down in a fire, your claim will only cover the cost of materials lost, not any of the labor or damages. Make sure that you have a comprehensive policy that covers you for full replacement value.
Building a home can be stressful, especially if you don’t have the right insurance protection. Talk to your broker today about what type of policy is best for you when you are building your custom home.