Home Owners Insurance During Construction

Today I heard the sad news that a co-workers house burned to the ground last night. As I heard the gut wrenching news it reminded me to mention that houses should be insured from the minute the first piece of lumber hits the ground during construction.

If you’re about to build a new home or are in the process of building a new home it’s very important to call your insurance agent. It’s very typical for both the builder and home owner to have insurance policies in place from the day construction begins. You want to be sure to have a replacement policy in place in case there is an accident during construction that results in the loss of your new home.

Often times I get calls from homeowners wondering why the insurance company wants the coverage to be greater than what it costs to build the house. This may sound strange but if you stop and think about what needs to be done after a tragedy like a fire then it makes a bit more sense.

Let’s say your new home burns down during construction. Not only will you need money to re-build the new house but you’ll also need money to demolish and dispose of the old structure depending on how much is still left. You may even need a new foundation depending on the damage that was caused due to excessive heat. You’re also going to need a place to stay during the 4 to 6 month construction schedule. As you can see the cost of a tragic fire can certainly be far more expensive than the original house especially if you start adding up the value of the contents.

So if you’re about to build a new home be sure to call your insurance agent. It’s very likely that any financial institute providing money for the project will require this anyway. However, this can slip through the cracks so it’s really important to get coverage in place before the work begins.