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Construction insurance, or builders risk insurance, covers your home or business property during a very important phase –the period during which it's being built. Home insurance and commercial property insurance are both designed to protect a structure that is already finalized. Buildings that are under construction have different risks than property that is already built and, thus, require different insurance.
Construction insurance covers your property only during the time that it is under construction. As soon as materials are ordered for the site it your policy is effective and it is cancelled as soon as the property is sold or occupied, unless the policy’s expiration predates these events in which case you may need to renew the policy or take another.
Insurance policies are designed to make policyholders whole after a financial loss. This is an important distinction to make when it comes to construction insurance because it means that only actual financial damages are covered by the policy, not the loss of the potential value of the home. That means if a fire ruins the semi-built structure and the supplies, the insured will not receive the potential value of the home had it been finished, but instead will receive the actual financial loss they've experienced through the materials that were damaged. Some policies may include coverage for additional losses, such as interest spent when a project takes longer to complete than originally anticipated.
Construction policies can be purchased for both residential and commercial properties. This includes vacation properties or properties intended to be quickly sold to residential buyers.
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