New Home Construction Insurance: 2025 Guide & Tips
What Is New Home Construction Insurance?
New home construction insurance is a specialized type of coverage designed to protect residential properties while they’re under construction. Unlike standard homeowners insurance, which covers completed homes and their contents, construction policies-particularly builders’ risk insurance-provide protection for structures, materials, and labor costs from the moment ground is broken until the home is move-in ready.
Builders’ Risk Insurance vs. Homeowners Insurance
| Feature | Builders’ Risk Insurance | Homeowners Insurance |
|---|---|---|
| When It Applies | During construction | After construction is complete |
| What It Covers | Structure, building materials, on-site equipment | Dwelling, personal property, liability |
| Exclusions | Earthquake, flood, faulty design, wear/tear | Construction defects, some natural disasters |
| Who Buys It? | Homeowner, builder, or general contractor | Homeowner |
The primary purpose of builders’ risk insurance is to shield property owners, general contractors, and subcontractors from losses due to risks like fire, theft, vandalism, and some weather events before the home is ready for traditional homeowners insurance.
Why You Need Insurance During Construction
Building a home is a significant investment, and new construction sites face unique hazards that can derail completion and add costly setbacks. Builders’ risk insurance and related policies fill critical gaps in protection at every stage:
- Fire, Theft, and Vandalism: Partially built homes and on-site materials are at high risk before move-in.
- Weather and Catastrophic Events: Storms, hail, and even minor wind damage can devastate half-finished structures and construction equipment. For storm-related loss examples, see our step-by-step guide on filing a home insurance claim after a hurricane.
- Liability: If someone is injured on the construction site-including workers, vendors, or even trespassers-you could face lawsuits and major financial consequences.
- Building Materials: Stored lumber, appliances, and fixtures are attractive targets for theft and can be expensive to replace.
Without adequate construction insurance coverage, any loss during the build phase can mean out-of-pocket expenses or costly delays. Once construction is completed and you transition to homeowners insurance for new builds, more traditional perils (such as sudden basement flooding) come into play-see the dedicated article explaining basement flooding coverage.
Types of Policies and Who Needs Them
Not all construction projects or stakeholders require the same kind of insurance. Here are the most common types of policies:
- Builders’ Risk Insurance: Essential for almost every new home build, covering damages to the property itself during construction.
- General Liability Insurance: Protects parties from third-party claims of bodily injury or property damage (often required by lenders or municipal codes).
- Workers’ Compensation Insurance: Required by law in most states for any contractor or builder with employees, covering injuries to workers on the job.
- Homeowners Insurance (Post-Construction): Once the build is complete and an occupancy permit is issued, homeowners need standard insurance to cover structure, personal belongings, and liability.
Who Needs New Construction Insurance?
- Individual Homeowners: If you’re self-managing a custom build or acting as your own general contractor, you may need to secure builders’ risk and liability insurance yourself.
- General Contractors and Builders: Professionals are typically required (by contract or lender) to hold both builders’ risk and liability policies, as well as workers’ compensation.
- Developers: For multiple homes or major developments, a combination of builders’ risk, general liability, and umbrella policies may be needed.
Some insurers offer bundled packages that include relevant options based on your project type, scope, and region. Remember: coverage limits and exclusions will vary, so it’s crucial to review policies closely and clarify responsibilities among stakeholders.
Cost of New Construction Insurance in 2025
Understanding Premiums and Influencing Factors
The cost of new construction insurance in 2025 varies widely, depending on location, project size, type of coverage, and even the choice of building materials. Builders’ risk insurance generally ranges from 1% to 5% of total construction costs, while liability coverage and workers’ compensation are calculated based on payroll, risk exposure, and local regulations.
| Region | Builders’ Risk Insurance (Average Premium) | General Liability (Annual) |
|---|---|---|
| Midwest | $1,200 – $3,000 | $800 – $2,000 |
| South (including Oklahoma) | $1,000 – $2,400 | $750 – $1,800 |
| West Coast | $2,000 – $5,000 | $1,500 – $3,200 |
| East Coast | $1,800 – $4,200 | $1,200 – $2,800 |
For detailed rate comparisons in specific states, check out our state-specific guide, such as home insurance quotes for Oklahoma in 2025.
Factors That Affect Your Premium
- Project cost and size
- Chosen building materials (e.g., fire-resistant materials may lower premiums)
- Location and weather risks (hurricane, wildfire, flood zones)
- Security measures at the site (fencing, surveillance, alarms)
- Claims history and contractor track record
To minimize your home construction insurance premiums, consider these proven ways to lower home insurance costs, many of which apply to construction phase coverage as well.
How to Choose the Right Policy
Step-by-Step Guide to Policy Selection and Transition
- Assess Your Risks: List all construction risks, such as theft of building materials, accidental fire, and weather damage. Be thorough-unexpected events are common during builds.
- Consult Your Builder or Contractor: Clarify who is responsible for purchasing which policies (sometimes the general contractor holds the main builders’ risk and liability coverage).
- Compare Policies: Get quotes from multiple insurers. Look closely at coverage limits, exclusions, deductibles, and optional add-ons (for flood or earthquake coverage, which are often excluded from standard plans).
- Transition at Completion: When the build is done and you have your certificate of occupancy, switch from builders’ risk insurance to homeowners insurance for new builds. This transition is crucial-delaying can create dangerous gaps in protection. To understand what your new policy should cover, see our comprehensive guide, What Does Home Insurance Cover?
- Document Everything: Keep records of all contracts, receipts, policy documents, and changes throughout the construction process. These may be needed in the event of a claim or dispute.
Expert Tips for Minimizing Premiums and Avoiding Pitfalls
- Ask if policy bundling can net you discounts across builders’ risk and post-construction homeowners insurance.
- Invest in site security: fencing, cameras, and alarm systems can often mean lower premiums.
- Keep your build on schedule-extended timelines may increase costs or trigger policy reviews.
- Ensure your contractor has valid general liability and workers’ compensation insurance to prevent double-insuring the same risks.
- Know what’s excluded-commonly, floods and earthquakes aren’t covered, making separate policies wise if you’re in affected areas.
Frequently Asked Questions
When should I buy builders’ risk insurance?
You should secure builders’ risk insurance before any work begins. Most lenders require proof of coverage prior to releasing construction funds. Even if you’re self-funding, insurance must be in place as soon as materials arrive and work starts.
Who is responsible for purchasing construction insurance: homeowner or contractor?
This depends on your contract. Often, the general contractor provides builders’ risk and liability coverage, but this is negotiable. When multiple parties are involved, clarify each party’s responsibilities in writing. Don’t assume coverage is in place-request policy copies and verify with the insurer.
Are subcontractors covered under builders’ risk insurance?
Typically, yes-for property and materials. However, their own workers’ compensation and general liability policies remain essential. Builders’ risk usually doesn’t cover injuries; injury claims fall under each contractor’s workers’ comp.
What are the most common exclusions in new construction insurance policies?
Standard exclusions include:
- Normal wear and tear
- Faulty design or poor workmanship
- Earthquake and flood (unless separately endorsed)
- Employee theft
- Mechanical breakdowns
Always read your policy carefully to identify any exclusions that require additional endorsement or separate coverage.
Does homeowners insurance cover construction work or additions after I move in?
Most homeowners insurance policies have coverage limits and may exclude major renovations or construction. If you are starting extensive work post-move-in, you may need a separate renovation policy or an endorsement. Always notify your insurer before beginning any substantial project. For details on coverage areas, check our article on the 7 key areas homeowners insurance typically covers.
How can I lower my new build insurance cost?
Beyond shopping around for competitive quotes, you can save by improving site security, choosing fire-resistant and disaster-resistant building materials, maintaining a clean claim history, and bundling policies when possible. For additional saving strategies, review our guide to lowering your home insurance costs.
