So you make the leap and build a new home. Let the fun begin! But between choosing floor plans and fixtures, do not forget homeowners insurance!
Depending on your insurance company, it can be as easy to insure a new home as taking out a new homeowner or getting another insurance called Builder & # 39 ;s Risk. Our insurance companies all use the simpler option of writing a new homeowners policy, so that's the option I will describe here.
Writing an insurance policy for a homeowner for a new home
So, fortunately, the process of insuring a new home is very similar to insuring an existing home, with a few exceptions. Let's check it out.
Step 1- Determine the coverage amount for the home
The insurance companies use the compensation cost as the coverage amount for the home (usually called coverage A-home). Compensation cost is the cost of rebuilding or compensating at today's cost.
If you are building a brand new home, the replacement cost is super easy to calculate ̵
So, if your house costs $ 300,000 to build, then the coverage amount is $ 300,000.
Because homeowners insurance is a package policy, the other amounts are filled when connected to $ 300,000 because they are based on a percentage of housing coverage. For example:
- Coverage A – $ 300,000
- Coverage B (detached outbuilding) – $ 30,000 which corresponds to 10% of coverage A.
- Coverage C (personal property) – $ 150,000 – 50% of Coverage A.
- Coverage D (additional cost of living) – $ 60,000 – 20% of Coverage A.
Liability and medical payments are also part of the policy, but these are not based on property coverage, so you have a choice of coverage limits.
Step 2- Writing Standard Home Insurance
The process of writing homeowners insurance for new home construction is similar to an existing home.
- The lender will require an insurance certificate before closing to take effect on your expiration date.
- The insurance agent prepares proof of insurance and either collects the homeowner's insurance premium OR the lender collects at closing.
- Somewhere in the middle, the application for homeowners' insurance is filled out and signed.
This is a bit of an oversizing, but you get the point. In addition to standard homeowners insurance, you may also need to consider the following extras. These are quite common when building a new home.
- Theft of approval of building materials – This may actually be required in your client's contract. What does it cover? Building materials waiting to be installed. Here are some examples: windows, siding, roofing materials, plumbing, you get the idea. Often builders will deliver materials to the workplace and these materials just wait until it is time to install. And yes, there are very good chances that these materials could be stolen. Different limits are available and the endorsement is usually on the policy throughout the year. Your builder does not want to be on the hook for these (because you are technically paid for the material and they belong to you).
- Removing or Reducing Coverage C- Personal Property – Some homeowners insurance companies allow you to reduce the amount of personal property or remove it completely. Since no one occupies the house, there is no personal property there. How to reduce or remove the amount offers a premium credit. Just remember to adjust the coverage when you move in!
Do not forget – when the home is ready you must contact your insurance company. The company can note that it is ready and take some external photographs (if desired). You can also add personal property / increase the amount of personal property if you made these changes when the policy was issued.
If you are building a new construction house, do not leave your homeowner's insurance to chance! You need an insurance agent who understands homeowners' insurance for a new home. Call (937) 592-4871 or fill out the form below to get started!