Homeowners insurance for new construction

Insurance for new construction

New construction insurance is typically more affordable than it is for older homes. Rate data from Quadrant Information Services suggests that, on average, a policy with a $300K dwelling limit costs 30 percent less for a home built in 2020 compared to a home built in 1959. An older home may be built with hard-to-source materials, which can make repairs more expensive, or have an older electrical system, which might spark a fire. Newer builds usually don’t have these issues. The risk of claimable damage is a major home insurance rating factor, so you’ll typically find cheaper home insurance for a new build compared to an older property.

When should you buy home insurance when building a new house?

Ideally, your home insurance policy takes effect the day you close on your home. If the dates don’t line up, you can usually move your closing date to match your policy’s start date. That way, you are financially protected by your home insurance policy the moment you put your keys in the door.

While your home is still being built, you will likely rely on the builder or contractor’s insurance policy — not your own. Builder’s risk insurance usually protects against perils such as:

• Theft
• Vandalism
• Fire
• Lightning
• Hail
• Wind
• Explosions
• Contamination

Before you begin building your home, be sure to meet with a licensed contractor to ask them about their insurance policy. You can also work with a licensed insurance agent to identify potential coverage gaps. If the contractor’s commercial insurance does not provide enough coverage, you might need your own builder’s risk insurance policy.

Home insurance coverage types for new construction

Every home has different insurance needs, including new builds. Before you buy a policy, it helps to first get familiar with what a standard home insurance contract covers:

• Dwelling coverage (Coverage A): Covers your home’s physical structure from all perils, except those excluded from your policy.
• Other structures coverage (Coverage B): Covers detached structures on your property, like gazebos or standalone garages, from all perils except those excluded from your policy.
• Personal property coverage (Coverage C): Covers your personal items, like furniture and other items in your home, for losses specifically named in your policy.
• Additional living expenses (Coverage D): Helps with the added costs of room and board, food, laundry and parking if you are displaced from your home after a covered claim.
• Liability insurance (Coverage E): Financial protection if you are found negligent for someone else’s injuries that occur on your property. Liability coverage can also extend outside the home.
• Medical payments coverage (Coverage F): Assistance with a guest’s medical expenses if they are injured at your home, even if you were not found to be negligent.

For most homeowners, it comes down to choosing between an HO-3 or HO-5 home insurance policy. Both policy types offer all of the coverage listed above but differ in how you are reimbursed when you file a claim and which losses your policy covers. An HO-3 is the most common type of home insurance, but an HO-5 offers more comprehensive coverage.

How much does home insurance cost for new construction?

As of November 2024, the average cost of home insurance for a home built in 2020 is $2,013 for a policy with a $300K dwelling limit. However, each home insurance company uses a proprietary method for calculating rates. So, when collecting home insurance quotes, you’ll notice that quoted rates will differ from company to company.

New construction home discounts

It’s not uncommon for insurance companies to offer discounts on policies for newly constructed homes. Discounts vary between companies and some are dependent on the specific materials used in construction. But, if you live in a new home, you may want to ask your insurance agent about potential ways to save, including:

• New home construction discount: This is often one of the most significant discounts on home insurance. Actual savings will vary between companies and policies, but some companies offer discounts of up to 50 percent.
• Home security discount: Many devices, from fire extinguishers to smoke and burglar alarms, can lead to discounts. Tech and safety features, like a water leak detection system, that help reduce risk to your home may also help reduce your premiums.
• Roofing discounts: The age of your roof and the material it is made of can impact premiums. New roofs, especially when made of more durable materials, often qualify for discounts.
• First-time homebuyer discount: If your new home is also your first home, your insurance company may offer you a discount.
• Green home discount: A LEED-certified green home could earn you a home insurance discount.
• Fortified home discount: Homes built with special damage mitigation features, like storm shutters or hail-resistant roof tiles, may be less likely to have claims. As a result, some insurance companies may offer a discount or a lower rate.

Frequently asked questions

Methodology

Bankrate utilizes Quadrant Information Services to analyze November 2024 rates for all ZIP codes and carriers in all 50 states and Washington, D.C. Quoted rates are based on married male and female homeowners with a clean claim history, good credit and the following coverage limits:

• Coverage A, Dwelling: $300,000
• Coverage B, Other Structures: $30,000
• Coverage C, Personal Property: $150,000
• Coverage D, Loss of Use: $60,000
• Coverage E, Liability: $500,000
• Coverage F, Medical Payments: $1,000

The homeowners also have a $1,000 deductible, a $500 hail deductible and a 2 percent hurricane deductible (or the next closest deductible amounts that are available) where separate deductibles apply.

These are sample rates and should be used for comparative purposes only. Your quotes will differ.

Year built: Rates were calculated based on the following years built for homes and assigned to our homeowners: “1959, 1982, 1992, 2010, 2016 (base) and 2020.”