Does homeowners insurance cover a dwelling under construction?
Well, the short answer is no. There are just too many coverage gaps and / or inadequate limits.
The missing coverages duringnew constructionorremodelingmight not be obvious until a loss occurs. At that point, your clients may encounter some unpleasant surprises when they learn that they weren’t protected as much as they thought.
Homeowners involved with new home construction or remodeling are often under the misconception that the homeowners insurance policy will provide the necessary insurance coverage for their construction project. In reality, a homeowners policy does not provide comprehensive course of insurance for many types of exposures personal lines clients face with new home building or remodeling, leaving them vulnerable to costly financial losses. That’s why it’s critical to counsel clients about the significance of builders risk insurance.
Consider these four reasons why homeowners need abuilders risk policyduring the course of construction.
1. Builders risk insurance has a broader coverage scope than a homeowners policy.
Builders risk for remodels or new home construction is thebest coverage optionbecause you get comprehensive course of construction insurance under one policy, rather than tacking on coverages to a homeowners policy.
Under our basic builders risk insurance policy backed by Zurich, covered property and losses can include perils like:
- Theft of building materials
- Fire
- Vandalism
- Property in transit
- Property in storage
- Property owned by subcontractors and suppliers
- And more!
With additional coverage endorsem*nts, your client can add protection for natural disasters such as floods, earthquakes and windstorms, soft costs, property in transit or temporary storage, debris removal and much more.
Because most homeowners make contract change orders during construction that increase the total completed value, our builders risk insurance even provides an add on coverage forchange orders increments up to 30%.
2. Builders risk insurance provides higher coverage limits than a homeowners policy.
Builders risk insurance for homeowners closes critical coverage gaps during the course of construction.
Let’s say your client needs to have debris removed after a loss. With the Builders Risk Plan insured by Zurich, they’re covered for $50,000 for projects up to $5 million, or $100,000 for project values over $5 million. With a typical homeowners policy, that amount is usually limited to the cost of 5% of dwelling, with a separate limit for tree removal - $500 and $1,000.
And let’s say due to a covered cause of loss, some of the construction scaffolding was damaged and needs to be replaced. With Zurich Builders Risk, your client could be protected up to $50,000 depending on their project value. With typical homeowners insurance, this coverage isn’t even available.
Through the Builders Risk Plan insured by Zurich, you can easily secure a robust policy for projects valued up to $75 million. Many coverages are automatically included in our basic builders risk policy with the option to increase sub-limits to meet your clients’ specific project needs.
3. Builders risk insurance offers more favorable policy terms than a homeowners insurance company.
For home remodeling projects covered with builders risk, the policy term could be six, nine or 12 months, and coverage can be extended pending underwriting review and approval. On top of that, homeowners can protect their home for the renovation only or for the renovation and the existing structure.
Thestandard policy term for a new dwelling under construction is 12 months. This single structure or “one shot” policy can also be renewed with underwriting approval.
4. Builders risk insurance helps minimize homeowners insurance claims.
If your client has builders risk insurance and something does happen, they file a claim under the builders risk policy, not the homeowners policy. That means they don’t have to worry about their insurance company cancelling them or increasing rates in the future.
If your client has plans to build or remodel, they need your guidance. Discuss how renovation insurance helps homeowners protect their investment and avoid potentially costly losses not typically covered under permanent property policies.
To learn how the Builders Risk Plan insured by Zurich stacks up to a typical homeowners insurance policy, download ourHomeowners Coverage Comparison. In it, you’ll learn about the coverage gaps that could await your personal lines clients who rely on homeowners insurance during construction.
This is intended as a general description of certain types of insurance and services available to qualified customers. Any description of policy provisions is meant to give a broad overview of coverages and does not revise or amend a policy. Refer to the policy coverage form for a complete representation of the scope of coverage, terms, conditions, exclusions and more. The policy is the contract that specifically and fully describes your coverage. Some products may not be available in all states and may only be offered on a non-admitted basis. Product availability is subject to change.
Is Homeowners Enough? A Builders Risk Coverage Comparison
Homeowners policies typically don’t cover the scope of exposures insured by residential builders risk. Those gaps can lead to financial implications should a loss occur. Read this guide to compare coverages, and learn how to select the best option to protect clients’ interests.
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