by: Aaron Whitaker
Building a new house can be stressful. Decisions from “what hardware to use” to “what tile do I want in the bathrooms?” are what most people will be spending their time and energy on prior to and during the construction. What is often thought of too late is how to insure your new home while it is under construction.
Commonly referred to as a “builders risk” policy, many insurance carriers have strict rules on when this type of policy can be written and when it is too late. One of the most common rules for builders risk policies is that once construction goes above grade (foundation or basement level), that it is no longer acceptable to be written on a builders risk policy. Even if just one 2×4 is above grade, some companies will not write the policy prior to the home being fully constructed.
This situation can put the homeowner in a bind. Often, the only option for a builders risk policy after standard insurance carriers have rejected to write it is to go to the wholesale (surplus) market for an insurance policy. These surplus insurance policies can cost 2-3 times as much as a policy with a standard carrier would be. Waiting to get insurance for new construction can end up costing you.
We recommend letting your local agency know as soon as you start planning your new home construction. Builders risk policies are written as if the home was already constructed, so your agent will need all of the details regarding the construction, possibly including architectural plans for the home. Many times once the home is finished and the owner has received an occupancy permit, the existing builders risk policy can be endorsed and become the home policy.
Timing is everything when it comes to a builders risk policy. The old adage “early is on time and on time is late” certainly applies here. Be sure to work with your local agent to review what is and is not covered under a builders risk policy. They can and usually do differ from a standard home policy.
@WLAinsurance www.WhitakerLaChance.com (269) 324-7700
About the author:
Aaron Whitaker joined Whitaker-LaChance in 2014 as a Personal Insurance Customer Service Representative. He brought with him extensive customer service experience from working in a retail professional camera store and computer electronic store for three years in Chicago. Aaron manages all personal insurance placement, marketing, account service and claim management. His expertise is in working with our clients to make sure their insurance program takes care of them through all the changes in life. Aaron is a graduate of Kalamazoo Home School Association and attended Columbia College in Chicago, where he studied Graphic Art Design. He is an avid photographer and enjoys fishing.