How Much Does Homeowners Insurance Cost for New Construction Homes?

Because home insurance for new construction can be complex, it’s a good idea to seek help from an insurance broker.

Lindsay VanSomeren
Lindsay VanSomeren
  • 8 years in insurance and personal finance writing

  • Former data scientist for U.S. Geological Survey

Lindsay is a freelance personal finance writer currently pursuing her Series 65 license. She enjoys helping readers learn money management skills that improve their lives.

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Danny Smith
Edited byDanny Smith
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Danny Smith
  • Licensed auto and home insurance agent

  • 4+ years in content creation and marketing

As Insurify’s home and pet insurance editor, Danny also specializes in auto insurance. His goal is to help consumers navigate the complex world of insurance buying.

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Updated January 4, 2024

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You’re aware that you need to protect your most valuable investment — your house — but what if your dream home is currently under construction? Fortunately, plenty of insurers offer coverage for new construction and renovation projects, but it’s a little tougher to sort out than a standard homeowners insurance policy.

Depending on the type of new build you’re going for, you may need a separate builders risk policy or a construction endorsement on your current homeowners insurance.[1] Here’s what you need to know before buying insurance coverage for your new construction.

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What is new construction home insurance?

“New construction home insurance” isn’t a specific product. It’s more of an umbrella term that refers to a couple types of insurance used to protect a home construction project.

Standard homeowners insurance assumes that you’re living in your home — which means if you don’t live in it because it doesn’t exist yet, you aren’t eligible for coverage.[2] Instead, you can get a “builders risk policy,” a short-term insurance policy used to protect your home while you build it until it’s ready for occupancy.

If you already have a home that you’re doing major renovations on, you may be able to get a construction endorsement instead from your current insurer. Some — but not all — insurance companies offer this type of coverage, which may be easier than purchasing a separate builders risk policy.

How much does home insurance cost for new construction?

The rates you pay for new home insurance depend on whether you’re purchasing a builders risk policy or a construction endorsement from your current homeowners insurance policy.

It can also vary by where you live because the risks, materials, and construction costs depend on which areas of the country you’re in. If you live in an area with frequent severe weather, like Florida, or a place with lots of natural disasters, like California, your coverage costs may increase. Construction site theft may be more common in some areas.

Here’s how much some top home insurance companies typically charge for builders risk insurance:

Insurance CompanyAverage Annual Quote
Westfield$660
Armed Forces Insurance$904
Erie$939
American Family$952
Travelers$1,089
ASI$1,108
Allstate$1,125
USAA$1,150
Auto-Owners$1,161
State Farm$1,184
Table data sourced from real-time quotes from Insurify’s partner insurance providers and quote estimates from Quadrant Information Services. Actual quotes may vary based on the policy buyer’s unique profile.

How much home insurance costs by home age

If you’re paying off your home, your mortgage lender will require you to purchase a homeowners insurance policy that offers coverage for your home’s physical structure in case a covered loss damages it.[3]

Older homes also face different risks than new home construction. For example, outdated wiring can cause fires, and plumbing issues can cause health hazards such as mold. They may also be crafted with building materials and methods that aren’t easy to replace or repair, driving up costs.[4]

To put things in perspective, it can be helpful to compare the average cost of homeowners insurance for existing structures with the cost of insuring a new home build. Here is how much insurers typically charge for a $500,000 dwelling insurance policy based on the home’s age:

Home AgeAverage Annual Quote
1940$5,787
1970$5,768
2000$5,522
2010$4,840
2020$3,562
Table data sourced from real-time quotes from Insurify’s partner insurance providers and quote estimates from Quadrant Information Services. Actual quotes may vary based on the policy buyer’s unique profile.

Builders risk insurance: Do you need it?

Builders risk insurance is typically used to cover a brand-new home construction project, as opposed to remodeling an existing structure. Homeowners should have this coverage for all new homes under construction, but who pays for it varies.

In some cases, your contractor or builder will purchase a builders risk policy as part of your contract to build the home. This can be advantageous because they may have a better idea of risks specific to your area and may be able to secure the best price as well.

Homeowners can also purchase the builders risk policy, which has other advantages. Since you’re the one with the policy, you don’t lose coverage if your general contractor decides to quit. It’ll be easier for you to file a claim yourself rather than going through your contractor, and you can ensure you have the exact coverage options you need for your financial situation.[5]

What does builders risk insurance cover?

A standard homeowners insurance policy mostly focuses on covering existing structures — which is a problem if you’ve just got a pile of lumber and other construction materials ready to assemble into a home, but you’re not quite there yet.[6]

That’s one of the key differences between homeowners insurance and builders risk insurance; builders risk insurance covers materials in transit and stored at the building site, where they may be easily stolen.

Good to Know

Building a new home also comes with certain dangers that established homes don’t face and, therefore, that traditional homeowners insurance policies may not cover. Some examples include temporary electrical wiring that can cause fires, wind damage from not-yet-fully-reinforced walls, or hydrostatic pressure from rainstorms that can cause basement walls to buckle in before the concrete is fully cured.

A typical builders risk policy covers these types of structural damage risks. Some policies even offer liability coverage, although this depends on the insurance company.

How to reduce your new construction insurance costs

You can often find lower rates on home insurance for new construction, but it’s important to make sure you’re fully covered. Most people don’t build homes frequently enough to know the specific risks they need to protect themselves against. And the last thing you want to find out is that expensive property damage isn’t covered due to an exclusion in the fine print.

Here are some tips to help you ensure you have as much coverage as you need without overpaying for it:

  • illustration card https://a.storyblok.com/f/162273/x/fa11c1fe75/comparison-website.svg

    Shop around

    Shop around for quotes on a new builders risk policy if you’re building a new home from scratch.

  • illustration card https://a.storyblok.com/f/162273/x/7955361cf0/customer-support-1.svg

    Check your insurance company

    Check with your current home insurance company to see if it offers a construction endorsement and, if so, what its coverage details and costs are.

  • illustration card https://a.storyblok.com/f/162273/100x100/4ec24627d2/flood-coverage.svg

    Consider flood and earthquake coverage

    Don’t forget to purchase coverage for natural disasters like earthquakes and floods, which homeowners insurance policies generally don’t cover.

  • illustration card https://a.storyblok.com/f/162273/x/f9e1d7766e/saving-bundle.svg

    Ask about discounts

    Make sure you’re eligible for all available discounts, which may be specific to builders risk insurance, such as job site security cameras to guard against theft.

  • illustration card https://a.storyblok.com/f/162273/x/456bd9da2f/phone-call-1.svg

    Talk to an advisor

    Find an insurance agent or broker who’s experienced in new construction coverage and can advise you on your specific coverage needs while helping you find the best option.

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New construction insurance FAQs

Building a new home can be exciting, but don’t forget to purchase reliable insurance coverage to protect your new home as you build it. Below, you’ll find answers to some of the most commonly asked questions about new construction insurance.

  • How does home insurance for new construction differ from regular home insurance?

    Home insurance for new construction covers the different types of risks that these projects face, as opposed to an already-built home. For example, they may cover construction materials in transport and on the job site, construction-related damage due to bad weather, and even liability if someone gets injured on the job site and has medical expenses.

  • When do you get homeowners insurance when building a house?

    It’s best to talk to your insurance company before you start construction so you’re aware of any restrictions and can get the type of coverage you need. It’s recommended to set your policy up as soon as you have the first building materials on site and have it last until the home is ready for occupancy.

  • Do you need homeowners insurance during construction?

    Regular homeowners insurance isn’t applicable to homes that don’t fully exist yet, which is why a separate insurance product — builders risk insurance — comes in handy. Alternatively, if you’re majorly renovating your home, some insurers offer a construction endorsement you can add to your current homeowners insurance policy.

  • Is home insurance cheaper on new homes?

    Yes. Homeowners insurance is typically cheaper on newer homes than older homes because they’re built according to current safety codes, and builders are more likely to use readily available building materials.[7]

  • What do you do for insurance when your house is under construction?

    Some insurers offer a construction endorsement under your existing homeowners insurance policy if you’ll be remodeling your home. If you’re building a new home, it’s best to purchase a separate builders risk policy, which offers more comprehensive coverage for the risks specific to the construction process.

Sources

  1. The Rough Notes Company. "Homeowners and Builder Risk."
  2. III. "A Vacant Home Still Needs Insurance – Don’t Be Caught Without Coverage."
  3. III. "Can I own a home without homeowners insurance?."
  4. III. "Insurance for Your House and Personal Possessions."
  5. Risk & Insurance. "The Unique Challenges of Builder’s Risk."
  6. III. "What is covered by standard homeowners insurance?."
  7. III. "Home buyer's insurance guide."
Lindsay VanSomeren
Lindsay VanSomeren

Lindsay VanSomeren is a freelance personal finance writer living in Suquamish, WA. Her work has appeared with FICO, Credit Karma, The Balance, and more. She enjoys helping people learn how to manage their money better so they can live the life they want.

Danny Smith
Edited byDanny Smith
Photo of an Insurify author
Danny Smith
  • Licensed auto and home insurance agent

  • 4+ years in content creation and marketing

As Insurify’s home and pet insurance editor, Danny also specializes in auto insurance. His goal is to help consumers navigate the complex world of insurance buying.

Featured in

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