Building a new home is an exciting journey, but ensuring it is adequately protected should be a top priority. New construction insurance is generally more affordable than coverage for older homes due to lower risks associated with newly built structures. Let’s dive into the details of homeowners insurance for new construction, including costs, coverage options, and ways to save.
Why Is Home Insurance for New Construction More Affordable?
New homes typically cost less to insure compared to older properties. According to data from Quadrant Information Services, the cost of insuring a home built in 2020 is about 29% lower than insuring a home built in 1959. Here’s why:
- Modern Materials: Older homes often feature outdated or hard-to-source materials, making repairs more expensive.
- Updated Electrical & Plumbing Systems: Older wiring can pose a fire hazard, increasing insurance risks.
- Lower Claim Risk: New builds are less prone to structural failures, reducing the likelihood of costly claims.
Average Home Insurance for New Construction Costs by Year Built
| Year Built | Monthly Premium ($300K Dwelling Policy) | Yearly Premium ($300K Dwelling Policy) |
|---|---|---|
| 1959 | $232 | $2,783 |
| 1982 | $234 | $2,806 |
| 1992 | $234 | $2,805 |
| 2010 | $213 | $2,560 |
| 2020 | $165 | $1,975 |
When to Purchase Insurance for New Construction Home
Your home insurance policy should ideally go into effect on the day you close on your home. If your closing date doesn’t align with your policy start date, consider adjusting the closing date to ensure seamless coverage.
Who Covers the Home During Construction?
While your home is under construction, the builder’s or contractor’s insurance policy usually provides coverage. Builder’s risk insurance typically protects against:
- Theft
- Vandalism
- Fire
- Lightning
- Hail
- Windstorms
- Explosions
- Contamination
What If the Contractor’s Coverage Is Insufficient?
Before construction begins, consult your builder about their insurance policy. If their coverage is inadequate, you may need to purchase your own builder’s risk insurance policy.
Insurance for Home Renovations and Additions
If you’re planning a smaller renovation, such as a kitchen remodel or basement finishing, your home insurance policy may not automatically cover materials and losses. In such cases, a dwelling under construction endorsement can help bridge the coverage gap.
For larger-scale renovations that take longer than two months, you may need a builder’s risk insurance policy or residential construction insurance. Consult with an insurance agent before starting any major home improvement project to ensure adequate protection.
Types of Home Insurance for New Construction
Understanding the key components of a standard homeowners insurance policy can help you choose the right coverage for your new build:
- Dwelling Coverage (Coverage A): Protects the home’s physical structure from perils except those explicitly excluded.
- Other Structures Coverage (Coverage B): Covers detached structures like garages and gazebos.
- Personal Property Coverage (Coverage C): Protects personal belongings such as furniture and electronics.
- Additional Living Expenses (Coverage D): Helps cover temporary housing costs if a covered event forces you to vacate your home.
- Liability Insurance (Coverage E): Provides financial protection if someone is injured on your property and you’re found responsible.
- Medical Payments Coverage (Coverage F): Pays for medical expenses of guests injured on your property, even if you are not at fault.
HO-3 vs. HO-5 Policies
Most homeowners choose between an HO-3 and an HO-5 policy:
- HO-3 Policy: The most common option, covering standard perils with named exclusions.
- HO-5 Policy: Offers more comprehensive coverage, including replacement cost for personal belongings.
How Much Does Insurance for New Construction Cost?
Home insurance rates vary by provider, but on average, a policy for a home built in 2020 costs $1,975 annually for a $300K dwelling coverage limit. Here’s a comparison of average annual premiums by insurer:
| Insurance Company | Annual Premium ($300K Coverage) |
| USAA | $1,132 |
| Auto-Owners | $1,566 |
| Amica | $1,235 |
| Chubb | $2,779 |
| Allstate | $2,288 |
| State Farm | $1,637 |
| Travelers | $1,803 |
Discounts Available for Insurance for New Construction
Many insurers offer discounts on insurance for new construction homes. Some of the most common include:
- New Home Construction Discount: Some insurers offer up to a 50% discount for brand-new homes.
- Home Security Discount: Installing smoke detectors, burglar alarms, and water leak detection systems can lower premiums.
- Roofing Discounts: New, durable roofing materials can lead to insurance savings.
- First-Time Homebuyer Discount: Some providers offer discounts for first-time homeowners.
- Green Home Discount: LEED-certified homes may qualify for lower premiums.
- Fortified Home Discount: Homes built with damage-resistant materials like hail-resistant roofing or storm shutters may receive discounts.
Frequently Asked Questions
Do You Need Special Coverage for Major Renovations?
If your renovation is due to damage from a covered peril (e.g., fire damage), your homeowners insurance policy may cover the repairs. However, cosmetic renovations are not covered unless specified in your policy. Some improvements, such as upgrading to impact-resistant roofing, may not be covered but can lower future premiums.
Does Homeowners Insurance Cover New Construction?
Generally, the builder’s insurance policy covers the home until construction is complete. However, discussing coverage details with your contractor before construction begins is crucial. If necessary, you may need builder’s risk insurance to fill coverage gaps.
Who Is Responsible for Insuring a House Under Construction?
The contractor is usually responsible, but it’s important to verify their coverage before construction begins. Consulting an insurance agent can help ensure you have the right level of protection throughout the process.
Final Thoughts on Insurance for New Construction
Securing the right insurance for new construction ensures peace of mind as you invest in your dream home. While new builds typically have lower insurance costs, working with a licensed insurance agent can help you customize a policy that meets your specific needs. Whether you need standard homeowners insurance, builder’s risk coverage, or endorsements for renovations, taking proactive steps now can safeguard your investment for years to come.
Want to know more about other insurances, Read our latest articles.
