Most home buyers opt to buy a home that already exists. But maybe you’re thinking of buying a home that’s being constructed—either by you or by a contractor of your choice.
If you plan on moving into a home that doesn't yet exist, there’s more to it than finding the right contractor. You’ll also want to insure a home being constructed. That’s because a home being constructed is also vulnerable to risks like severe weather damage and theft.
“There are several ways to insure a home being constructed,” says Terry McConnell, vice president, Personal Lines Underwriting, at Erie Insurance. “It mostly depends on who is building the house: a contractor working on behalf of a developer, a contractor hired by an individual or an individual looking to build his or her own home.”
If it’s a contractor working on behalf of a developer
McConnell explains that a contractor working as a developer typically has a builder’s risk commercial policy while the home is under construction. So you shouldn't have to worry about how to insure a home being constructed if this is your situation.
If you’re hiring a contractor
While some contractors take care of the insurance as part of a turnkey construction project, it is more common to insure the home yourself.
With Erie Insurance, if the home is being built by a contractor with a completion date within six months you can be eligible for a homeowner’s policy for the completed value of the home. “Unless the home has very high value, it is typically completed in this amount of time,” says McConnell, who adds that longer times are available for those who need it.
If you’re building your own home
Things are different if you decide to build your own home. “Unless you’re a contractor by trade, you’re more likely take longer to construct your home,” says McConnell. “It’s also more common for the construction to go on for years rather than for months. For that reason, the coverage we offer is more limited than the kind we would offer if you hired a professional contractor.”
Extra insurance for extra risks
Your homeowners' insurance policy for a home in the course of construction only covers items that are permanently installed in your home. So building materials on the construction site but not yet installed are not automatically covered against theft and damage.
You can still insure items not yet installed by adding a theft of building materials endorsement to your policy. The endorsement lets you choose the level of coverage, which is in effect until the home is completed.
No matter which route you go, it’s worth talking with a qualified agent to discuss your situation. One of our agents can give you trusted advice about how to insure a home being constructed.