If something goes wrong during the construction of your home, you could lose a lot of money. In a situation like this, home building insurance can help you minimize your downside. But if you’ve never built a home before, you probably don’t know the benefits of investing in home building insurance.
Luckily, home building insurance isn’t all that complex.
If you keep reading, you’ll learn exactly how home building insurance can protect you when building a home. By the time you’re finished, you’ll know how home building insurance works and whether you need it or not.
Table of Contents
What is Home Building Insurance?
The coverage provided by home building insurance can vary depending on the company that offers it. But it is typically designed to protect the items used to construct a home.
For the most part, you will find that the following items are covered by building insurance:
- The tools and equipment used to build the home
- The materials used to build the home
Some insurance policies also cover items that are kept offsite.
This kind of insurance isn’t designed to protect any of the ‘personal possessions’ normally ‘home insurance.’ That is because such items aren’t expected to be on site since the home is under construction.
Home building insurance policies generally last between 9 to 12 months. This period is in line with how long you’d expect a home construction project to last. Of course, the policies can be extended/renewed if there is a delay associated with the project.
How Can You Work out If You Need This Insurance?
So, now you might be thinking whether you need home builders insurance. The answer is, it depends.
A lot of the time, the contractors you are hiring to complete the project will have this kind of insurance already in place. This means that you do not need to take out a similar policy which essentially covers the same items.
But before you decide to not take out insurance, you need to be absolutely clear that the contractors have sufficient insurance. You also need to verify the details of contract you sign with the contractor.
If they say that they have builders insurance, make sure that they will ‘call in’ their policy, if something happens. You’ll also want to check the extent of their policy. There is no point in making use of their insurance policy if it only covers relatively small issues/has small limits.
It is important you do not take the contractor’s word on matters relating to insurance. Make sure you get a chance to see the insurance documents so that you can be sure you’re properly covered.
The Benefit of Working with Large Home Building Companies
One of the benefits of working with large home building companies is that you will be able to rely on them more when it comes to this kind of thing. Such companies will normally have tight contracts and insurance policies in place.
Of course, you should follow the same process for a large company as you would with a small company.
The difference is that the larger company have a bigger brand to protect. So they’ll want to make sure they are clearly communicating what is and isn’t protected. That way their brand is less likely to be tarnished by a disgruntled customer.
Consider Investing in a Homeowners Policy
As mentioned, a home building policy protects the tools, equipment, and materials involved in a home building project. This kind of policy does not provide you with liability coverage, though. For that, you’ll need a homeowners insurance.
A homeowners policy will protect you from being liable for a construction accident. It will also protect you in the event of a catastrophic storm or fire, which might wreak havoc on the construction site.
Remember that not all insurance policies are created equally. Make sure you are always diligent when reviewing what is covered by a homeowners policy. You do not want to be in the stressful position of making a claim, only to find you’re not covered.
In some cases, you may find the company providing you with home builders insurance can also provide homeowners insurance. They might be able to combine the two policies. This can allow you to cover yourself at a cost that is cheaper than what you’d have to pay if you bought the two policies separately.
How Much Should You Spend on Insurance?
It’s hard to say how much you should spend on home construction insurance. The cost is going to vary depending on the size of the home you are building. That is because the size of your home impacts the cost it will take to rebuild it if something goes wrong.
What matters most, is that you do not try to seek out the cheapest level of cover possible. If you do this, you may end up with a policy that does not provide adequate levels of cover.
If you’re adamant about keeping costs low, put some time into shopping around. By speaking to many different insurance providers, you should be able to find a price that is reasonable.
Do You Need Home Building Insurance?
Building a home can be a lot of fun. But if something goes wrong, costs can quickly spiral out of control. With home building insurance, though, you can prevent costs from piling up.
You may find that your contractors are able to provide you with this form insurance. Though you should always check the paperwork to be sure. If you feel that you can’t trust contractors, you might want to work with a larger more established building company.
When purchasing home building insurance, it can often be a good idea to buy homeowners insurance too. This can protect you in case there is a construction accident when your home is being built.
This can all seem like a lot of work. But if you take the time to learn about the right kinds of insurance now, you will be protected if your home building project doesn’t go as planned.
Interested in learning more about real estate? Check out this post which details some of the up and coming real estate trends!