Building a new custom house can be a dream come true for many homeowners. It is a lengthy process; however, the end results usually give homeowners a house that fits them perfectly. Besides the many considerations that go into home design, permits, and other building concerns, those who opt for new construction must also think about construction insurance and the various things that can affect it. Insurance policies obtained from a construction insurance agency may be higher or lower depending on a number of details about the house.
New Construction vs. Pre-Existing Homes
Generally speaking, newly built houses are less expensive to insure than many older ones. This is especially true with regards to historic homes or houses that are old enough that they require extensive reconstruction work to restore them to original condition should any damage occur. When using standard and cost-effective methods, a new construction build is less expensive to repair or rebuild. Yet construction insurance rates are not based on the age of the building alone. The variables referenced below also play a large part in determining home construction insurance rates.
Type of Construction
In addition to the age of the structure, insurance rates also take the type of construction used into consideration as well. Certain building types are more vulnerable to damage and more costly to repair or rebuild. For example, a brick home may have lower rates than a wood frame home.
Home Location and Proximity to Fire Stations
There are a number of ways in which a home’s location can either increase or decrease insurance premiums quoted by a construction insurance agency. Building in certain areas where weather risks, flooding, or other disasters are more likely can increase premiums, as can building in certain neighborhoods. Similarly, closeness to the coast, a river, or some other water can also increase premiums. In addition, proximity to local fire departments can be a factor, with homes that are closer to such facilities having lower rates.
Pools, Hot Tubs, and Spas
Adding any of type of pool, hot tub, or spa to a new house may be the icing on the new home cake; it can also result in an increased construction insurance premium. Liability is the main concern with any pool or similar feature, so owning one usually requires additional liability coverage.
Credit and Claims History
Besides details about the new house itself, a construction insurance agency looks the credit history of the owner and whether there is any history of previous damage claims. The purpose for this is to identify homeowners who may be a particular risk or be more likely to make expensive claims. In most states, insurance agencies may also legally consider credit and payment history, along with the amount of outstanding debt and any recent attempts to obtain more credit.
Obtaining sufficient construction insurance is an essential step that all homeowners must take in their process of building a custom home or purchasing new construction in general. Based on the variables noted above and others, coverage rates can differ. Every construction insurance agency must approach each policy based on applicable variables to provide appropriate loss coverage!