Your guide to home insurance during construction

Whether you need special insurance during construction depends on the scope of the project and the type of coverage your contractor provides.

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By

Pat HowardManaging Editor & Licensed Home Insurance ExpertPat Howard is a licensed insurance expert and managing editor at Policygenius. Pat has written extensively about the home insurance industry and his insights as a subject matter expert have appeared in several top tier publications, including The New York Times, The Wall Street Journal, CNBC, and Reuters. Pat has a bachelor's degree in journalism from Michigan State University.&Rachael BrennanSenior Editor & Licensed Auto Insurance ExpertRachael Brennan is a senior editor and a licensed auto insurance expert at Policygenius. Her work has also been featured in MoneyGeek, Clearsurance, Adweek, Boston Globe, The Ladders, and AutoInsurance.com.

Edited by

Jennifer GimbelJennifer GimbelSenior Managing Editor & Home Insurance ExpertJennifer Gimbel is a senior managing editor at Policygenius, where she oversees all of our insurance coverage. Previously, she was the managing editor at Finder.com and a content strategist at Babble.com.

Updated|4 min read

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Key takeaways

  • Standard homeowners insurance policies don’t cover homes that are under construction.

  • If you’re planning short-term home renovations, you can add home under construction insurance (also called a dwelling under construction endorsement) to your policy for additional protection.

  • For more extensive construction projects or new home builds, you’ll need builders risk insurance.

  • Builders risk insurance and home under construction coverage protects your home during construction and building materials from theft, fire, vandalism, and storm damage.

Do I need homeowners insurance during construction?

You might need additional home insurance coverage or an entirely separate insurance policy while your home is under construction, though it all depends on how large of a project you’re undertaking and the type of insurance coverage your contractor or builder provides. The two main types of insurance during construction that you might want to consider are home under construction insurance and builders risk insurance. 

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Home under construction insurance vs. builders risk insurance

Home under construction insurance

Builders risk insurance

What it is

An endorsement you can add to your standard home insurance policy to ensure you’re fully protected while your home is under construction

An entirely separate insurance policy that’s either purchased by you or your contractor prior to the start of construction

When it’s necessary

Short-term construction projects, like adding a new room to your home or remodeling your kitchen

New construction homes or long-term construction projects, like renovations or repairs that are expected to last longer than a month or two

What’s covered

Fire, storm damage, burst pipes, theft, & other covered perils — plus soft costs associated with construction delays, building materials, & premises liability

Your home and construction materials from fire, vandalism, storm damage, theft, & other covered perils — but not liability

How much it costs

Varies based on the scope of the project

Varies based on the scope of the project

Home under construction insurance

Also known as a dwelling under construction endorsement, home under construction insurance is a home insurance coverage add-on designed for home construction projects that aren't expected to take longer than a month or two. Your standard policy coverage won’t cover burglary or updates to your house if it’s considered to be under construction.

If you’re planning a home remodel or renovation, check with your insurance company to see if this endorsement is necessary. Adding a new room to your home or remodeling the entire kitchen might be viewed as a construction project to your insurer, especially if you need to stay somewhere else during the project.

Keep in mind that this endorsement is not for long-term construction projects. If the renovations or repairs are expected to last longer than a month or two, you’ll need coverage that’s intended for lengthy, extended repairs like builders risk insurance.

Which type of insurance will cover the structure during construction?

Builders risk insurance covers the structure of your home during construction, but this type of coverage varies based on the specific situation. Depending on the type of work you are having done, the coverage may be known by a few different names, including course of construction insurance and special inland marine insurance.

What is covered by home under construction insurance?

This coverage is designed to cover homes under construction in the same way that a standard policy covers completed homes. With dwelling under construction coverage, your home is covered against things like fire, storm damage, burst pipes, theft, and other covered perils while it’s under construction. 

Home under construction insurance also typically include special coverages to protect against losses that are unique to construction projects, including:

  • Soft costs: If the construction is delayed due to a covered loss, this endorsement will cover the “soft costs” associated with the project. Soft costs include licensing and permit fees, interest on the construction loan, and other costs that are caused by the project’s delay.

  • Building materials and supplies: Covers any building materials or tools on-site that are being used to construct or repair the house, including protection for materials or equipment in transit or stored at a temporary location.

  • Premises liability: If a visitor is injured at your home during the course of construction, this coverage can pay for any potential medical or legal expenses arising from the incident.

Keep in mind that in order to be covered by this policy endorsement, the construction project needs to be carried out by a licensed builder. If you file a claim for damages and your insurer discovers that you used an unlicensed contractor, your claim will likely be denied. 

First Person Experience

Rebecca McWilliams, an architect who has worked in the construction industry for over 20 years, explains the importance of purchasing builder’s risk insurance or home under construction insurance. “Depending on the client’s financial position, they may choose not to purchase additional coverage. The experience of the contractor, value of the new home, and client’s own risk tolerance are all factors that a client should consider before making a decision about insurance coverage. We’ve all heard stories about a fire on a construction site that sets back the progress, schedule, carrying costs, labor, and materials costs and that is exactly why carrying insurance is so important.”

What does construction mean in insurance?

When it comes to your homeowners insurance, construction refers to the process of building a home or other structure. Builders risk insurance protects your property from theft, fire, vandalism, and storm damage while it is under construction.

How much does home under construction insurance cost?

The cost of home under construction coverage will depend on the scope of the project, the materials being used, and the project’s duration. In general, you’ll pay progressively more in premiums as the project progresses and you add more square footage, install flooring and appliances, and other factors that increase the rebuild value of your home. 

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Builders risk insurance

Builders risk insurance is designed to provide coverage if you’re building a new construction home or making extensive renovations to your home that will take months on end. Entirely separate from home insurance, whether you or your contractor is responsible for purchasing this policy will depend on the terms of your construction contract.

Builders risk policies are typically offered in three, six, nine, or twelve month contracts. The length of your policy term will depend on how extensive your construction project is and how long it’s expected to take.

→ Take a deeper dive into builders risk insurance

What is covered by builders risk insurance?

Builders risk insurance covers the construction of your home, any additional structures on site, and construction materials from fire, wind, lightning, hail, theft, vandalism, and explosions. Unlike dwelling under construction insurance, builders risk insurance doesn’t include liability coverage. Instead, your contractor or builder likely has general liability insurance to cover any issues that may arise during the build.  

Does home insurance cover DIY?

While it is possible your home insurance might cover some damage related to DIY construction or repairs, it isn’t very likely. Most insurance companies have limitations and exclusions on what they will cover. Read your policy carefully and check with your insurance company to find out exactly what is (and isn’t) covered by your homeowners insurance.

How much does builders risk insurance cost?

The cost of builders risk insurance will vary widely based on location, the type of construction project you’re undertaking, construction materials, and how long the project is expected to take. In general, builders risk insurance in an area that’s at high risk of tornadoes, hurricanes, or wildfires will likely cost more than a policy for a construction project in a more mild location. Likewise, major remodels and projects with high-quality materials will likely lead to higher insurance premiums.

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Authors

Pat Howard is a licensed insurance expert and managing editor at Policygenius. Pat has written extensively about the home insurance industry and his insights as a subject matter expert have appeared in several top tier publications, including The New York Times, The Wall Street Journal, CNBC, and Reuters. Pat has a bachelor's degree in journalism from Michigan State University.

Rachael Brennan is a senior editor and a licensed auto insurance expert at Policygenius. Her work has also been featured in MoneyGeek, Clearsurance, Adweek, Boston Globe, The Ladders, and AutoInsurance.com.

Editor

Jennifer Gimbel is a senior managing editor at Policygenius, where she oversees all of our insurance coverage. Previously, she was the managing editor at Finder.com and a content strategist at Babble.com.

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