You’ve spent a while waiting to move into your brand-new home. But before you can get the keys and start moving in your furniture, your mortgage lender will require you to purchase homeowners insurance.
Insuring a new home or a home under construction comes with some unique considerations. For a home under construction, you might want builder’s risk insurance. And for a newly built or renovated home, you’ll want to make sure you’re purchasing enough homeowners insurance to cover your home’s value.
Let’s walk through these different home insurance coverages, how they work, and how you can find cheap home insurance.
Your home’s age is a major factor in your home insurance costs. Newly constructed homes — meaning homes built within the last two years — may be cheaper to insure given their lack of wear and tear and minimal mechanical issues.1
For example, the average home insurance rate for a 2-year-old home with $300,000 in dwelling coverage and a $1,000 deductible is $1,468 per year — compared to $2,276 per year for a 20-year-old home with the same coverage limits and deductible.
But new homes also might have higher values, which may call for more robust home insurance coverage.
Whether your home is one year or 40 years old, you need a standard home insurance policy, which covers damage to your home and personal property. Insurance companies don’t make different policies for newer homes — but your home’s age may affect how much coverage costs.
Here’s what a standard home insurance policy covers:2
Your home’s structure
Detached structures, such as a garage or shed
Your personal belongings, such as furniture and clothing
Bodily injury to guests on your property
Additional living expenses, like a hotel room while your home undergoes repairs
And here’s what standard policies typically exclude:
Damage caused by earthquakes
Damage caused by flooding
Damage from routine wear and tear
A home under construction carries specific risks that you won’t find in a completed home. For example, what if the wood being used for your future home is damaged while being driven to the construction site? A standard homeowners insurance policy, which covers the existing structure of a home, wouldn’t cover this type of damage.
That’s where builder’s risk insurance comes in. You or your contractor might get this form of insurance, which covers the risks that come with building a house. Builder’s risk insurance covers building materials that are either in transit or being stored at the construction site. This coverage protects you if these materials are stolen or damaged.
Builder’s risk insurance is a short-term policy that protects your home while it’s being built. Here are a few things builder’s risk insurance covers:
Damage or theft of building materials that are on site or in transit
Wind damage to temporary walls
Fires from temporary electrical wiring set up at the construction site
Basement damage before the foundation is fully secured
Once the construction team has built the home and it’s being used as intended, builder’s risk insurance no longer applies. Now, standard homeowners insurance covers your home.
Builder’s risk insurance might also not cover certain leased equipment and temporary storage equipment.
The average annual cost of home insurance for a $300,000 home with a $1,000 deductible is $2,377 per year, according to Insurify data.
Several factors affect your insurance costs, such as your home’s age, value, location, loss history, construction quality, and more. Additionally, your credit history and the amount of coverage you purchase will affect the cost of your homeowners policy.
Insuring a newly constructed home is cheaper on average than insuring an older home. For example, a standard State Farm policy is $1,392 per year for a new home and $1,995 for an old home built in 1940.
New homes feature modern building materials and construction methods, which make them less likely to sustain damage. Meanwhile, old homes have wear and tear that’s more likely to lead to damage and home insurance claims, which is why insurers charge more to cover these homes.
The table below shows how homeowners insurance rates vary based on a home’s age. Generally, rates are higher the older a home is.
The price of builder’s risk insurance is typically a percentage of the total cost of a construction project — usually either 1%, 3%, or 5%. Your location, which influences local supplies and labor costs, is an important factor in the cost of your builder’s insurance. The quality of the construction materials and projected size of the completed home are other factors.
The table below shows how much homeowners might pay for builder’s risk insurance based on the cost to build their home and the percentage used to price coverage. More expensive construction projects generally lead to higher builder’s risk insurance costs. As expected, policies that cost 1% of the construction cost tend to be cheaper than other options.
The following insurance companies are good options for homeowners looking to insure their newly constructed homes.
To choose the best companies for newly constructed homes, Insurify considered the average annual rates of 40 top insurers. We also considered each insurer’s availability, discounts and coverage options, industry ratings, and user reviews for customer service and claims processing.
Insurify’s team of data scientists analyzes millions of home insurance quotes and weighs publicly available reviews, claims payout rates, complaint indexes, financial strength scores, company reputations, and proprietary quoting data. Our editorial team applies this insight to inform our unbiased reviews and recommendations.
Builder’s risk insurance can be useful as your home is being built. These three insurance companies can protect your home while it’s under construction.
To choose the best companies for homes under construction, Insurify considered the average annual rates of 40 top insurers. We also considered each insurer’s availability, discounts and coverage options, industry ratings, and user reviews for customer service and claims processing.
Insurify’s team of data scientists analyzes millions of home insurance quotes and weighs publicly available reviews, claims payout rates, complaint indexes, financial strength scores, company reputations, and proprietary quoting data. Our editorial team applies this insight to inform our unbiased reviews and recommendations.
You can save on homeowners insurance coverage with the following tips:3
Homeowners often ask the following questions about home insurance for new construction. Here’s what you should know before you buy a policy.
Either you or your contractor handles insurance during construction. You might prefer to have your contractor handle builder’s risk insurance given their intimate knowledge of the construction process.
Homeowners insurance is usually cheaper for newly constructed homes given their newer materials. Meanwhile, older homes with wear and tear are at greater risk for damage.
Builder’s risk insurance covers damage or theft to building materials that are on the construction site or in transit. It also may cover temporary storage or scaffolding during construction.
Builders often back homes with warranties, which can last up to 10 years for “major structural defects” and up to two years for HVAC, plumbing, and electrical systems.
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At Insurify, our goal is to help customers compare insurance products and find the best policy for them. We strive to provide open, honest, and unbiased information about the insurance products and services we review. Our hard-working team of data analysts, insurance experts, insurance agents, editors and writers, has put in thousands of hours of research to create the content found on our site.
We do receive compensation when a sale or referral occurs from many of the insurance providers and marketing partners on our site. That may impact which products we display and where they appear on our site. But it does not influence our meticulously researched editorial content, what we write about, or any reviews or recommendations we may make. We do not guarantee favorable reviews or any coverage at all in exchange for compensation.
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