When purchasing insurance for new construction properties, it is important to understand its unique insurance needs. Neglecting to do so exposes you and your business to hundreds of thousands of dollars in potential losses resulting from risks like fire, theft, or other property damages.
How much insurance coverage is sufficient for a property being built?
When it comes to insuring a new construction property, the dwelling coverage amount should be equal to the expected construction cost. This would ensure that if you had a total loss of the property being built, you would receive close to what you have invested into the property. Please remember, with new constructions your settlement amount would be settled on invested capital at the time of loss.
Do I need liability insurance for a new construction property?
Yes! In addition to direct property damages, new construction properties face high liability exposure. Liability coverage is always a MUST when it comes to new construction investment properties. There isn’t a right or wrong amount of coverage to carry. Properties that are being built from the ground up face greater liability exposure. They usually require higher limits of $1MM per occurrence and $2MM aggregate. One slip and fall claim could cost you hundreds of thousands of dollars. An umbrella policy might be recommended depending on your risk appetite and investment property portfolio size. There are risks associated with using your homeowner’s liability policy for new constructions. Always keep your personal lines liability policy separate from your business.
Does my premises liability coverage extend to the general contractor or any workers?
No, it does not. Your general contractor should carry their own GC or workers comp policy. Verify that they do and ask them to add you as an additional insured. As a matter of fact, anyone working on your property should have liability coverage of their own. By verifying that your workers have their own GC or workers comp coverage, you can help protect yourself from exposures you face by injured contractors.
What deductible should I carry on a new construction project?
Deductible is a portion of what you are responsible for paying “out-of-pocket” toward a loss at your property before your insurance carrier will pay for a claim. When deciding on a deductible to carry, take the lowest claim you would file and double it. If you would never file a $1,000 claim, don’t carry a $500 deductible. Remember, the lower your property deductible, the higher your rate. If you choose a higher deductible, the premium savings generated may be more than enough to offset the difference. If you want to read about other ways to save on insurance costs, read about tips for controlling your insurance costs.
Lastly, how much does new construction insurance cost?
Insurance costs on properties being built vary based on several factors. The most important factors are desired insured amount, deductible and level of coverage. However, keep in mind that the cheapest coverage isn’t always the best coverage, especially for new construction properties. When speaking with your agent, pay attention to what is and isn’t covered on your policy for new construction properties. Some causes of loss can be added to your coverage and others are completely excluded.
Insure your New Construction Property with National Real Estate Insurance Group
When insuring a new construction, most investors choose to go with the insurance provider they used to insure their own personal residence. Most of the time, the insurance agent will either tell them they cannot do it, or offer coverage that isn’t very well suited for this type of risk, leaving you exposed.
National Real Estate Insurance Group was created specifically for real estate investors and can help you insure your new construction project. Because of our monthly reporting form, you can increase your coverage amount as you are putting more money into the project, therefore never overpaying for insurance on a new construction.