House-Building.com
NEWSLETTER #270 July 2009 House-Building Home Page

Insurance For New Home Construction Projects

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  Index:
 
  1. Insuring Your Home From the First Day of Construction to the Last
  2. Subscription and Removal Information
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1. Insuring Your Home From the First Day of Construction to the Last

In the midst of all the thousands of decision that must be made during home construction, adequate insurance sometimes falls by the wayside. With a condominium, such insurance is the responsibility of the developer, at least until the homeowners association takes control of a complex, but with a single family residence, this is your responsibility.

Do not assume that your contractor has adequate insurance. Generally some combination of the builder's policy, additional supplemental coverage, and your own homeowner's policy will give the greatest degree of protection to the project.

In determining how much insurance is required during construction, first ask for a full explanation of the coverage carried by the contractor and verify the existence of the policies with the given insurance agency. (It doesn't matter if you implicitly trust the contractor. Check anyway.) The contractor's policies should provide

  • Worker's compensation for injuries that occur on the job for both his regular crew of worker and any sub-contractors hired.

  • General liability that addresses negligent acts or acts of omissions that can cause injury or property damage.
If the existing coverage seems inadequate or special circumstances apply, you can ask your contractor to take out a builder's risk policy. This will extend the coverage to such things as:
  • the interest the contractor has in materials before they are installed and while they are being transported.

  • the value of the property itself up to the point at which you sign off on the job and take possession.
In general you can expect such policies to include benefits for wind, hail, fire, lightning, vandalism and theft, and some degree of benefits in the event that the structure collapses. Standard exclusions will be weather damage caused to property or equipment left in the open, mechanical breakdowns, "acts of God," or acts of the government such as the outbreak of a war. It is not uncommon for riders to be attached to builder's risk policies that will cover the removal of debris, any charges for emergency services such as ambulance or fire service fees, or sewer and plumbing issues.

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New Home Construction Insurance Cont.

Additionally, consult with your insurance professional to determine if you can take out a standard homeowner's policy that will extend to damage to the building while it is under construction. Be sure to find out if the degree of coverage can be flexibly altered once the work is complete. For instance, you might feel a need to have a higher amount of liability during the work phase, but less once you have moved in.

The cost of building a home today is considerable enough without finding yourself responsible for costs that should be covered by adequate insurance benefits. Do not move forward with your project until you fully understand all the policies in place or have filled existing gaps in coverage with new policies. If your contractor balks at taking out builder's risk coverage, you may be working with the wrong person. Your primary goal is to make sure that your investment in your home is protected from the first day of work until the day you move in. Don't settle for anything less.

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