How to Insure an Incomplete House
Insuring a home is a relatively straightforward process, but insuring a home that is incomplete, or under construction, can be a more difficult process. A standard homeowner's policy may not be right for your situation and, even if you do use a homeowners policy, there are pitfalls to watch out for.
Choose the right policy depending on what you will use the home for. Choose a rental dwelling policy, vacant dwelling policy, or renovation policy If you plan to flip or rent the home. If you will occupy the home yourself when it is finished, then a homeowners policy may be appropriate.
Review the plans with your agent. You will need to have a timeline for construction. If you believe your home will be completely finished in less than 6 months, most insurance companies will cover it under their homeowner's program. If work on your unfinished home is stalled and you do not know when it will be finished, ask for a vacant dwelling policy.
Check your contract with the builder to see who is responsible for covering building materials and tools at the site. They will not be covered unless you ask your agent to endorse your policy.
Notify your agent when the project is complete and you move in or rent the house.
- If you have a major rebuilding project or are starting from the ground up, ask your agent about a builder's risk policy. It may be more appropriate for you.
- Homeowner's policies restrict coverage on vacant or unoccupied homes. If you are not presently living in the home, ask your agent how the restrictions affect you. Vacant dwelling policies are the right choice for many people with unfinished homes, but beware, these policies usually do not offer replacement coverage (they pay claims using depreciation or market value) and they rarely offer theft coverage. This is a problem if you have an empty home that has copper, HVAC units or other building items that are attractive to thieves.
- Contractor's estimate, work order, or plans