Are you planning on building a home in Platte City (or nearby)? There’s something exciting about taking a blank canvas and constructing your dream home, but not without some intentional planning. Like it or not, insurance is a necessary part of that plan. Here are some things to consider when building a home.
Should You Insure Your Vacant Property?
Absolutely. You can extend Liability from your current homeowners or renters policy for next to nothing.
Generally speaking, a homeowners or renters policy will automatically extend Liability to a vacant lot at no extra cost. But the vacant lot cannot have any structures on it. If the lot has a shed or a fence on it, then the cost to extend Liability is minimal. Or if you’re farming the property, a Liability policy will look a little different.
Reach out to your insurance agent to make sure Liability from your current homeowners or renters policy will extend to the lot (or land) where you plan to build a home. Insurance policies have subtle differences. Don’t assume you have Liability coverage where you intend to build.
Does Your Builder Have Insurance?
Whether your Builder is a buddy from high school or you just met, ask him/her for a Certificate of Insurance. This is a one page document that reflects proof of insurance.
More specifically, you want to see that your Builder carries the following insurance coverage:
General Liability is providing your Builder coverage if he/she is negligent for causing property damage or bodily injury to a third party.
Your Builder should carry minimum Liability limits of $1,000,000 Per Occurrence / $2,000,000 Aggregate.
This hinges on the contract you have with your Builder. Who is responsible for carrying Builders Risk – you or your Builder? If your Builder is, then the Certificate of Insurance should reflect this coverage.
If you’re building the house yourself, hiring subcontractors as-needed, be sure to request a Certificate of Insurance from each subcontractor that reflects General Liability coverage. You will want to purchase a Builders Risk policy yourself.
Builders Risk: Do You Need It?
Like I mentioned above, it depends on the contract you have with your Builder.
A Builders Risk policy will cover things like:
- Damage to the structure during construction
- Theft of building materials
- Damage from weather (e.g. a tornado blows away the building materials)
Your Old Home is Now Vacant
Your new home is finished. You’ve moved in. Your old home is vacant with a for sale sign in the yard. Is the homeowners insurance policy on your former home sufficient until it sells?
Be aware, if your home sits vacant for a period of time, you’re likely to have some significant gaps in coverage. Usually that period of time is 30 to 60 days.
Things like theft, vandalism, fire are excluded. You will have to refer to your policy for specific exclusions.
You can buy a policy specific to vacant homes to avoid any disparities in coverage. Be sure your vacant home policy includes coverage for theft and malicious mischief. There are insurance companies that offer coverage for vacant homes and exclude these two items.
The Bottom Line
Constructing a home takes planning. Don’t neglect taking time to plan ahead to prevent financial loss.