What to know about Owner Builder and New Home Construction Loan Insurance.
Applying for a New Home Construction Loan to build your dream home is exciting. Now let’s take a little time to understand the various types of insurances available to ensure that you and your project are properly insured during the course of construction and beyond.
Property Hazard Insurance:
This portion of your coverage provides insurance for the structure and physical property in the event of loss due to fire, wind, water, and other natural disasters such as earthquakes. In certain high-risk regions, the Property Hazard Insurance will not include specific events, such as floods, and the owners will require a separate policy against those hazards. The amount of property hazard insurance typically depends on the cost of replacing your home in the instance. When applying for a home construction loan. Property Hazard Insurance will only be required after construction is complete and you have received an occupancy certificate.
Course of New Home Construction Loan Insurance:
Similar to Hazard Insurance in that it covers the structures and materials of a project. However, to protect your project during construction, you will use the Course of Construction Insurance to provide the same protections for structures and building materials. This does not extend to liability for injury, negligence, or delays, which is separate insurance. Course of Construction Insurance provides temporary coverage for property and construction materials during construction or renovation from theft, vandalism, fire, water, earthquake, not provided for in the contractor’s bond or liability policies. Most New Home Home Construction Loan Lenders require that you obtain enough coverage to provide for the completion of the project and prepaid for a 12-month term. The homeowner or project owner would purchase the Course of Construction Insurance.
Builder’s General Liability Insurance:
This liability insurance protects the General Contractor from lawsuits by sub-contractors due to injury or damages as well as rental equipment theft or damage incurred during the construction period. It can also be used to pay for attorney, court, and witness fees in case of a lawsuit. It also protects you by providing for damage coverage due to negligence since most projects use sub-contractors, ensuring that your General Contractor has sufficient liability insurance to shield you from possible claims is essential to protect your investment.
A Builder’s Bond is an option coverage not required by New Home Construction Loan Lenders also known as a Performance Bond. This bond will compensate the homeowner if the contractor does not complete the project according to the terms of the agreement sent between the project owner and the General Contractor. contract.
Make sure to do your due diligence when it comes to looking at your options for owner-builder and new home construction loan insurances. Don’t forget if you are a veteran you have more options.