Do You Need Insurance for Homes Under Construction or Renovation?

Building a new home or carrying out a renovation is exciting! Finally, you start seeing where all those years of savings are being channeled. And of course, you can’t stop dreaming about where to position your workshop, home office, or kids’ playroom. Or you can’t wait to get the renovations complete and have your home looking as good as when you built or purchased it. But have you considered insurance for your home under construction?

While most people do not see the need for insurance for homes under construction or renovation, this is one of the greatest measures you can undertake to safeguard yourself. While there are various insurance products for homes under renovation or construction in the market, the choice will depend on the scope of the entire project. For instance, you can easily get quotes for home insurance in Moncton or home insurance in Frederiction. In addition, if you happen own a farm, you can also check out options for cheap farm insurance in Canada.

So, why undertake the insurance for homes under construction or renovation? Construction projects may be marred by all sorts of risks from natural disasters such as windstorms and fires to issues such as vandalism and theft.

As a homeowner, you have to ensure that the structure and any property inside are fully covered against:

• Damage claims- Damage claims may arise when construction material causes damage to the property. Sometimes, the damage may be huge to an extent of making the home uninhabitable. In this instance, construction insurance may pay for the relocation costs to a secondary home.

• Injury claims- Construction projects, no matter how small they seem, involve a lot of handy work. Workers are more prone to injuries in a construction setting as opposed to office settings. Insurance covers expenses that may be incurred in treating a worker injured on site.

• Product claims- In the course of a construction project, a contractor may need to install permanent equipment to facilitate the project. The insurance should cater for damage claims that may arise if the product malfunctions, causing damage to the home or injury.

Types of Insurance for Homes under Construction or Renovation

1. Contractor liability insurance- This is one of the most important insurance policies in any construction project. It safeguards against accidents, worker injuries, and property damage that occurs during the projects.

2. Workers compensation insurance- This protects workers against injuries that may occur while at work. This type of insurance is important given the type of machinery and equipment handled during construction projects.

3. Performance/ Surety bond- This insurance protects builders and contractors from losses that may be incurred due to the inability to deliver as per the project needs. In most instances, contractors can site bankruptcy. The funds in this insurance cover cater for the completion of the project if the team is unable to carry on the project to completion.

4. Builders risk insurance- This is a temporary policy. It is ideal for shorter projects such as renovations and remodeling. This coverage protects the property under construction or renovation and construction materials against limited accidents. Builders' risk insurance covers all construction work on the site. It also covers fire, explosions, smoke, hail, theft, vandalism, vehicle collision, and windstorms. Most policies also give the option of extending the policy to cover for additional extensions. Some of these include profit coverage, replacement cost valuation, labor expenses, and equipment testing. However, builder’s risk insurance does not cover injuries, worker’s compensations, vehicles, tools and equipment, and legal issues.

5. Flood insurance- Floods can hinder the completion of a project or ruin any construction work that has been completed. Flood insurance is important especially if the construction location is prone to flooding. However, in most instances, this insurance has a 30-day waiting period.

5 things you should know about insurance for homes under construction or renovation

1. If the home under construction is new, the insurance needs will be unique

New homes do not have a homeowner yet. As such, the builder or construction company is solely responsible for the home insurance. Also, if you purchase a home that is still under renovation, the contractor must ensure that an insurance plan covers the home until the end of the project.

2. Only hire contractors who have insurance

While a property owner is responsible for covering their personal property and liability due to injury caused to the workers, a contractor MUST have a valid insurance policy. This is important as it safeguards against accidents that may occur.  

3. Get a new insurance policy if you move out during renovations

The noise, dust, and disruption during a renovation may necessitate the need to move until the renovations are done. If you opt to move during the renovations, you will need another policy other than the homeowner’s insurance policy. This is because the builder’s risk policies have a more extensive coverage that is not provided in the homeowner’s insurance policy. The builder’s risk policy hence covers complicated remodels and renovations.

4. Your renovation insurance will be based on the type of renovations.

Renovations can be versatile, from major to minor renovations. Your renovation may be classified into:

• Basic remodel- These include changes to the home interior features such as cabinets and flooring.

• Major structural renovation- If your renovation involves the replacement, repair or removal of heavy walls, elevators or stairways, it is classified as a major structural renovation. Major renovations are more prone to losses due to the increase of workers traffic in the home, use of heavy and dangerous tools to carry out renovations and not forgetting vandalism since most homes will be unoccupied.

If you are carrying out a major renovation, it is safe to add coverage to your homeowner’s insurance or get a builder’s risk insurance.

• Minor structural renovation- These are changes to the exterior or interior home features such as windows, doors and ground floor.

If you want to handle a renovation with the help of friends and family without using the help of a builder, ensure your medical and liability coverage is adequate. This should cater for any accidents such as slips, eye burns, falls and any other hazard that can occur in a renovation site.

• Liability insurance will pay for medical expenses. Also, if someone decides to sue you for an injury, liability insurance should cater for it.

• Medical payments should cater for minor injuries for anyone hurt in the course of the renovations.

5. Get covered before the onset of the project

This may seem like common knowledge. However, you may be tempted to begin the renovations before your insurance policy is confirmed. You are better off waiting for a few weeks as opposed to incurring losses due to the occurrence of uninsured accidents.