New Construction Home Insurance: Why Do You Need It?

A man and a woman holding a blueprint inside a home under construction

Building a new house is an exciting experience for everyone. A new home is more than just a place to live; it’s where you’ll have new adventures and create lifelong memories. That is why investing in your home’s insurance should be one of the top priorities. 

Fortunately, there are multiple options when it comes to insuring a new home. However, it is important to understand the unique differences between new construction home insurance and home insurance on a recently built house. Don't worry; our experts have explained each policy and how they can protect your new home.

Key takeaways:

  • New home insurance is a long-term form of homeowners insurance for homes built within the last two years.
  • New construction home insurance is a short-term insurance policy for homes and residences undergoing construction or renovation.

What is new home insurance?

New home insurance is a type of homeowners insurance that specifically covers recently built homes — generally those built within the last two years. Unlike other homeowners insurance, new home insurance typically only offers coverage for the first 3 to 5 years after a homeowner moves into the new house. 

The homeowners will then need to change their policy to another homeowner's insurance policy. But before making any adjustments to your current insurance policy or purchasing a new insurance policy, you’ll want to contact your insurance provider to inquire about any potential discounts or penalties.

Cost

According to the National Association of Insurance Commissioners (NAIC), the average cost of homeowners insurance in the U.S. is $1,200 annually. In comparison, homeowners insurance for a newer home is typically cheaper. Home insurance on recent builds may also qualify for substantial discounts. This is largely due to the fact that newer homes require less maintenance and renovation than older homes.

Coverage

Home insurance on a recently built residence covers a wide range of potential issues that arise when moving into a newly built home. While there can be some exclusions, this usually includes:

Although vastly inclusive, home insurance on recent builds does not apply to any financial losses amassed prior to the construction of the home. This includes:

  • Building materials and supplies
  • Equipment

New home insurance vs. New construction home insurance

While new home insurance and new construction home insurance can sound similar, they offer two different types of coverage. New home insurance is a form of home insurance specifically applied to recently built homes and residences. On the contrary, new construction home insurance is a short-term insurance policy for homes currently undergoing construction or renovations. 

Moreover, the amount of coverage provided by each of these insurance policies is also different. New home insurance covers any structural, personal or legal damages you face after moving into the residence. New construction home insurance, on the other hand, only covers damages to the structure of the home, building materials and equipment — both on-site and off-site — acquired before the end of construction.

  New home insurance New construction insurance
Covered Dwelling coverage, personal property, and liability The structure of the home, building materials, supplies and equipment (both on-site and off-site)
Not Covered Building materials, supplies and equipment Personal property, living expenses and medical payments for others

What is new construction insurance?

New construction home insurance is for homes or residential dwellings currently undergoing construction or renovation. This insurance policy commonly lasts until the construction on the residence is complete or for nine to 12 months afterward and offers less coverage than your average home insurance policy. Your contractor will also be able to help you find the best insurance policy for your situation.

Coverage

There are many problems that can arise during the construction of a new home, including vandalism and theft of materials, the injury of a worker or damage to an existing structure. New construction home insurance provides coverage for these and more, including:

  • The structure of the home
  • Building materials
  • Equipment, both on-site and off-site
  • Builder’s risk insurance
  • Not always included with a new home construction insurance policy
  • An insurance policy purchased by the contractor to cover supplies, equipment, and workers during a construction project.

While new construction home insurance is very extensive, there are limitations to what it covers. This includes:

  • Personal property
  • Living expenses 
  • Medical payments for others

Five tips for choosing residential construction insurance

When purchasing new construction home insurance, there are numerous aspects to consider, which can be intimidating. These tips can help to better prepare you before purchasing new construction home insurance and help the whole process run smoothly.

1. Get insured before you start construction

You'll want to purchase your new construction home insurance policy before construction begins. This will guarantee that any risks and losses that might occur during the construction process are covered. You’ll need to contact your current insurance provider in order to adjust your policy and make sure all conditions are covered under a new home construction insurance policy, including the location and house details.

Adjusting your policy from your current home owner’s insurance to a new construction home insurance policy will usually take a couple of days but can take longer depending on the scope of your project. If you do not have a current home insurance policy, this time frame may take longer as you typically have to set up an account with an insurance company prior to purchasing a new construction home insurance policy.

2. Read your builder’s contract

Most times, contractors will already have a Builder's Risk Insurance policy in place when constructing or remodeling a house. Nonetheless, you’ll need to check with your contractor to see if they have a builder's risk Insurance policy and if it will cover the construction of your home. You will also want to consider getting your own insurance; as most times, the owner will be responsible for ensuring the project is protected. During the review of your builder's contract, you’ll need to discuss who will be responsible for purchasing the insurance during home construction.

3. Determine the scope of construction

New home construction insurance is not the same for everyone, as it is largely based on the scope of the work being done. Larger construction or renovation projects will generally require more insurance than smaller ones. If you or anyone else is occupying the property during the construction process, you will need additional insurance coverage. This will also protect the integrity of the contractor and builder.

Your insurance company will also be able to help you during this time, as they’ll likely know the best plan for your situation and any new building ordinances that will impact the amount of coverage you’ll require.

4. Take inventory

While construction is underway, your home will be empty. This is a good time to take an inventory of your possessions and get them properly insured. If you do find any of your possessions damaged or missing after construction, you’ll want to file a claim with your insurance company as quickly as you can. There are many options when it comes to taking a home inventory, so choose the one that fits you best.

5. Change your policy after the build is done

Once construction is finished, you’ll be required to update your policy to a long-term homeowner’s insurance policy. This will need to be completed before you move in. Updating your policy will provide you with the necessary insurance and protect your home for years to come. Before changing your policy make sure nothing has been damaged or lost during construction. If anything is, you can file a claim with your insurance company as long as it is covered under your policy.

New home construction insurance FAQs

From how to get coverage on a new build to price comparisons, below we answer all the frequently asked questions about new construction insurance.

Who insures a home under construction?

The homeowner is typically the one who insures a home under construction. And while some builders may offer their own policies, you’ll need to see if their policy is the best for your situation. If not, you can chat with your insurance agent to get the necessary coverage.

How do you insure a home under construction?

Since coverage for a home under construction is not part of your regular home insurance policy, you’ll want to work with your insurance provider to find a policy that best fits your situation. During construction, you’ll typically need to choose a builder’s risk insurance policy as well.

Is homeowners insurance cheaper on new construction?

New construction homeowners insurance is typically cheaper. The amount will typically depend on your specific home and location. 

Whether you’re building your house from the ground up or buying a new build, every home needs to be protected. And with the right type of insurance, you can have peace of mind knowing that you're covered no matter what happens. Need help finding the best home insurance for you? Don’t sweat it — that's what we’re here for.