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While you don’t have to purchase a regular homeowner’s insurance policy when you’re building a new home (unless you’re doing the building yourself) having some sort of coverage is essential. Not having a policy in place during the construction phase won’t protect you against liability injury, theft, and more. Here are some types of insurance you should think about purchasing before building begins on your dream home.

Builder’s Risk Insurance

Builder’s risk insurance is specifically designed to cover homeowners during the construction process. The typical policy covers just about any disaster you can think of, including fire, wind damage, hail, vandalism, and lightning.

How vital is builder’s risk insurance? For starters, no lender will finance your project without this type of coverage. Builder’s risk insurance covers 100 percent of the value of the home, but it doesn’t protect the home’s contents since there typically aren’t personal possessions at the construction site.


A Homeowner’s Policy

Purchasing a homeowner’s policy during the home-building process is recommended, even if it’s not mandatory. For one, homeowner’s insurance provides liability coverage, which covers you in the case of a construction site accident. Homeowner’s insurance will also cover you in case of fire or storm damage.

Here’s another reason to buy homeowner’s insurance during the construction process: most people are pleasantly surprised by how inexpensive homeowner’s insurance is when they’re building a new home. Your rates are going to be lower than if you purchased an already-built home several years before.


Building Smart Can Lower Your Insurance Costs

Whether it’s new technologies, building materials, or more, there are many ways to build smarter and reduce your chances of having an insurance claim. For example, most insurance companies offer discounts if you choose to side your home with durable materials (such as stucco instead of wood).


Workmen’s Compensation Insurance

Your builder may tell you he’s not required to provide any coverage at all, which is true as long as they don’t have employees. However, most states require contractors to have workmen’s comp insurance if they have employees. Besides, construction is a labor-intensive field in which accidents happen more frequently than in other occupations.

Make sure that both you and the contractor understand what your state requires regarding workmen’s compensation insurance.


The bottom line is, adequately insuring yourself when having a home built will prevent costly claims that create a future financial hardship.