The need for having your home insured doesn’t just start at the time when you’re about to move in. If you own a lot and you’re building your home on it, the risks of accidents, vandalism, or theft are already present the time that you break ground and your contractor initiates the task of constructing your dream home. When your home is still under construction, a builder’s risk insurance will get you covered. But deciding whether you need to buy one or not will depend on a number of factors.
Building a home is certainly not easy. When you are building one that is far from being a simple construction project, the risks that you have can become considerably higher. Having insurance coverage from the time the foundations are laid to the moment when you’re about to call it home will be your assurance that you will have the protection when the time calls for it.
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What is a builder’s risk insurance?
Depending on the insurance company, a builder’s risk insurance can cover equipment, tools, and materials that are intended for constructing a home. Generally, it provides coverage against vandalism, theft, and accidents that workers may have in the performance of their job. As the duration of building a home varies, so does the duration of a builder’s risk insurance. While typical coverage is about 1 year, it can be renewed or extended as the need arises, and as the policy provides.
When do you need a builder’s risk insurance?
If you have a contractor to build the house for you, you may or may not need to buy a builder’s risk insurance. Depending on your agreement, your contractor could already be responsible for insuring the materials, equipment, and risks associated with the actual construction work. If your contractor does have one, you may save the amount and put them into your homeowners insurance instead. After all, you would likely have no properties at the site yet while construction is ongoing.
Seems convenient? Not necessarily. In most cases, the insurance that contractors have while they are pouring the concrete, installing the trusses, or laying down electrical cables only covers for the materials and equipment they would be using, as well as the possibility of their workers having work-related accidents. Anything or anyone who’s not part of the construction process is not likely to be included. If accidents occur while you and your child are visiting the site, you would have to spend on medication or treatment from your own pocket.
If you are building your home by your own, it would be more practical to buy a builder’s risk insurance to cover for materials, equipment, and vandalism, and a standard homeowners insurance at the same time to cover for fire, water damage, and other applicable covered perils.
If you are acquiring your home by a mortgage, the cost of insuring the property on the construction phase will be taken cared of by the lender or the developer. Since you practically still don’t own your home until you’ve fully settled the mortgage, buying a homeowners insurance would be the wise move for you.
Does builder’s risk insurance include liability coverage?
The answer is NO. While some insurers do cover accidents involving construction workers, the liability for any untoward event involving other personalities is certainly not included. While in the construction phase, it would seem normal for any homeowner or would-be homeowner to check on the progress and quality of work. You may even bring your friends or your family along. Sadly, any accident that you can have within the site would not be covered by your builder’s risk insurance. Although the contractor usually makes it a point to keep the work environment safe, the risks would always be there. When you and/or the contractor can be held liable for any accident within the construction site, obtaining a liability coverage will serve your best interest.
How do you get liability coverage?
Check on your homeowners insurance policy if you already have one. But in case you still don’t, shop for the one that includes liability coverage, or buy an additional endorsement. Although it may seem like additional expenses at a glance, the coverage it provides will be your peace of mind. Different companies would have different conditions. Choose the one that best suits your purpose.