August 14, 2022


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Homeowners Insurance for New Construction

Finding the right homeowners’ insurance policy is an integral part of constructing your dream house. Especially when mortgages are involved. Thankfully, new build home insurance policies are often less expensive. Why would home insurance be cheaper on new homes? Because newer construction involves newer materials and up-to-date practices and techniques, newer homes are generally less risky to insure, and therefore cheaper.

Still, finding the best rates for your home insurance will often mean doing some research and shopping around. For first-time home buyers, there can be a lot to learn. But before you start comparing quotes, let’s consider what variables go into insuring a newly constructed home.

Insuring new construction homes

When looking for a home to buy, the cost of home insurance is one variable you should consider. In general, the newer the house, the cheaper the insurance. The less time a structure has been around, the longer it should take before anything goes wrong with it. At least, that’s part of the thinking behind new and older home insurance rate differences. The age of your home can also influence which insurance endorsements might be worth adding to your policy.

Determining which new build home insurance endorsements are best for you will depend on your locale, home type, belongings and what standard coverage your home insurance already includes. For example, many people have personal property like jewelry, art or electronics with values that exceed what their standard policy will cover. A scheduled personal property endorsement can help fill in the gap and cover your valuable possessions at higher limits. It’s also important to consider whether flood, earthquake or other weather and disaster damage endorsements are a good fit for your location.

Home insurance coverage types for new construction

There are many factors and considerations that go into building a new home on your land. For starters, you may need to buy builder’s risk insurance before the construction gets underway. This coverage can protect against damages to the materials and features of the construction project while it is being built. If fire or weather damages the materials or the structure before the building is finished, for example, builder’s risk insurance could help cover the losses.

Builder’s risk insurance

A standard home insurance policy can go a long way, but it may not always be the right protection tool. Homes under construction or serious renovation can benefit from builder’s risk insurance because it is specialized property insurance designed precisely for these situations. With this home insurance construction endorsement, the building is covered while being worked on, including the building materials being used.

The risks a completed home and a home under construction face are not always the same. These differences are one reason that builders’ risk insurance can be helpful. This specialized insurance covers a wide range of perils:

  • Theft
  • Vandalism
  • Fire
  • Lightning
  • Hail
  • Wind
  • Explosions
  • Contamination

Still, after construction is complete — if not before — you’ll likely benefit from a standard home insurance policy. Builder’s risk insurance is excellent for unfinished home builds, but its job is complete when the house is. Afterward, keeping your property financially protected will involve a traditional homeowner’s insurance policy, which can protect both the structure and the contents of your home.

How much does home insurance cost for new construction?

Home insurance, like all insurance, is priced based on financial risk. The less likely a home is to need repairs or other alterations and fixes after covered damage, the cheaper it is to insure. Additionally, the less expensive estimated repairs are, the cheaper the policy is. These two variables — the estimated frequency of claims and home repair or replacement cost —  play a prominent role in determining insurance premiums. As a result, new building home insurance is often seen as less financially risky by insurance companies. For example, consider the cost of replacing new mass-produced materials instead of antiquated materials that are no longer as commonly available. The older materials will generally cost more.

The table below highlights some of the top insurance companies and their average rates for a policy with $250,000 in dwelling coverage, according to Bankrate’s study of average home premiums. Personal rates will vary between customers, companies and circumstances. Consider speaking with a licensed agent about quotes to see what your rates could be.

New construction home discounts

It’s not uncommon for insurance companies to offer rate discounts on policies for newly constructed homes. As mentioned, these newer structures are often seen as less risky by the provider. To incentivize customers with new construction homes to purchase coverage, insurance providers often share some of this reduced risk with the customer in the form of savings. Discounts vary between companies and some are dependent on the specific materials used in construction. For example, some types of roofs may lead to discounts while others do not. Below are some other common discounts that might make sense for a new home.

  • New home construction discount – This is often one of the most significant discounts you can find for home insurance. Actual savings will vary between companies and policies. Generally, new home discounts can save homeowners significantly during the first few years of insuring a new home.
  • Home security discount – Many devices ranging from fire extinguishers to smoke and burglar alarms can lead to discounts. Features that help reduce risk to your home are often able to reduce your premiums.
  • Roofing discounts – The age of your roof and the material it is made of can impact premiums. New roofs, especially when made of more durable materials, can often qualify for discounts with some insurers.

Frequently asked questions

Do you need special coverage for major home renovations?

Up to a limit, standard home insurance policies generally cover renovations. The specifics depend on the policy and certain renovations may void the policy or leave your expanded or improved home underinsured. It may also be vital to make sure that any contractors involved have proper insurance in case they get injured, something gets damaged or a fault occurs in the work.

What is the best home insurance?

The best home insurance policy and company will vary between individuals and circumstances. Rates vary significantly between people and companies, and providers often specialize in certain coverage areas to gain distinction from each other. For this reason, shopping around for providers is one of the best ways to find the best home insurance for you.

Does homeowners insurance cover new construction?

While homeowners’ insurance can often cover some renovations, it is not the right type of policy for a house being built. Insurers are hesitant to issue standard home insurance policies to homes that are vacant and still being constructed. Instead, builder’s risk insurance is often recommended.

Who is responsible for insuring a house under construction?

While your contractors may need certain types of insurance, the owner insures the property being built. In these situations, obtaining a homeowners insurance new construction endorsement is the standard approach. Builder’s risk coverage is designed and used for this purpose.