A home under construction is vulnerable to a variety of risks, including wind damage, fire, theft of materials and vandalism, so insuring it begins long before the building is finished. Talk to an insurance agent about the type of coverage you need before you break ground.
Either you or the contractor should have builders risk insurance, a special type of property insurance designed for a building under construction. The policy covers the unfinished structure and materials. A standard home insurance policy generally excludes coverage for theft of materials for "dwellings under construction." Builders risk insurance is not as expensive as a standard home insurance policy because it covers only the property. It does not cover liability or personal belongings, such as furniture and clothing.
You should also have liability insurance in case someone gets injured on the property, such as a friend touring the unfinished home or neighborhood kids attracted to the construction site. Liability insurance would pay your legal costs if you were sued. Make sure your general contractor is adequately insured, too, and consider asking to be named as an additional insured on his liability policy for extra protection.
When the building is completed, and you're ready to move in, you can drop the builders risk insurance and buy a standard home insurance policy. Purchase enough insurance to cover the cost of replacing the home. Home insurance policies include coverage for personal belongings equal to about 50 to 75 percent of the home's replacement cost. The precise figure depends on the policy. Make sure the coverage is adequate for all your stuff, and consider buying additional coverage for valuables, such as expensive art, antiques, electronics and jewelry. Home insurance puts a dollar limit on coverage for these items. You have to pay extra for an endorsement on the policy, or "floater," to provide greater protection.
For more on choosing a home insurance policy, see "New homeowner insurance basics."
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