Building a custom home is one of the best ways to ensure you get whatever you want out of a property. Although you’re probably trying to save money since it can be expensive to build custom: it’s vital that you remember to consider insurance as well.
From the insurance you need while you're building to the cost of insurance after your project is completed, this is everything you need to know about insuring a custom build.
The Insurance While Building
While building, you need insurance on your property. This might sound strange at first, but consider the risk builders and construction teams are taking on by working this untouched land, dealing with heavy equipment, and handling the heights and heavy objects that come with insurance.
If you're involved in any way with building construction, you have to carry builders' insurance. This coverage protects you financially if anything happens to the home or to the people on the site while it's being built.
There are dozens of different insurance policies and companies, so every plan will cover different problems and issues and will come at a different price point: but it's a good idea to try to get as much coverage as you may think you need. You may assume everything will go fine, and hopefully, it will, but if something goes wrong, you want to be protected.
Builder’s insurance usually costs one to five percent of your total construction budget. So if your budget is $200,000 and you’re getting the policy for three months, you might end up paying between $600 to $2,600 per month in premiums. This is far cheaper than what you’d have to pay if something went wrong.
The Size Affects Price
One of the largest parts of properties that affect both the value and the cost of insurance is the size of the property. How large is your physical house and the property it sits on? You deserve a property that makes sense for you and allows you to create a home for yourself and your loved ones: but know that the bigger it is, the more your insurance payments will be.
Of course, nobody is avoiding adding on a bedroom, or expanding the kitchen, because it might cost them a couple hundred more every year, but it’s good to keep in mind how high insurance can get.
Updated and Expensive Materials
The higher value of the items you use in your home, the higher your insurance premiums will be. Adding a gorgeous slate roof will protect your home and make it look better while adding around $15,000 in property value: but it will also then add up to $150 a year in insurance premiums. This might not seem like a lot compared to how much value it adds, but it's important to keep in mind.
Safety and Solid Construction
The better built your property is, the better your insurance will go. You’re less likely to need an insurance payout if you have historic storm windows than you would if you had thin single-pane windows. Make sure to invest in your home's materials so you won't have to worry about needing an insurance payout any time soon.
Where the Property Lays
The good thing about building a custom home is that you can pick exactly where to place it. If you place it in a floodplain, you're going to see insurance payments that are twice as high as the cost you'd see otherwise because it's considered high risk. Avoid this risk and instead make sure you pick a location that makes sense for you, is safe for the house, and has everything you need in it.
Newer Construction is Generally Cheaper
Although constructing a new home can often be more expensive than buying an older one: insurance companies favor new builds. As long as your home is well built, you’ll see lower rates and better options, even if the value of your home is higher than the homes around it. This can give you the option to invest in synthetic stucco instead of holding off because you fear the insurance payments.
Insurance Will Sit Between 1% and 2%
Due to all of these factors, insurance will usually sit between one to two percent of the new build's value. This means that the more value to build into it, and the higher it's valued at:, the higher you'll see your insurance rates go up. Homeowners' insurance is as important as getting sturdy insulated concrete forms, so it's vital that you get this the moment you're able to. Homeowners' insurance will protect your investment, so you don't have to worry about losing all of the work you put into it.
Whether you're building a custom home because you couldn't find one that suited you in your area, or you're finally building your dream home: it's important to know how much everything will cost you in the end. This is how expensive it is to ensure a custom-built home.
Roger Marx is a contributor to the Innovative Building Materials blog. He is a content writer for the construction and home improvement industries with an interest in landscaping, outdoor remodeling, and home renovation. Roger is focused on educating homeowners, contractors, and architects on innovative materials and methods of construction that increase property value and improve sustainability.