AMC Insurance provides Commercial insurance policies to cover your new house while it is been built. The right coverage depends on your own situation, here are some considerations.
First, what is covered by the Course of Construction (COC) insurance policy?
Building – this will be calculated based on the final replacement cost of the building, plus costs to demolish the damaged home, so the Insurance company can rebuild it at their cost, not your costs or your time. Keep in mind, the insurer will pay extra to extradite building, so the cost will exceed your own budget, which does not include your own work value or profit components.
Building Materials on Site – all your materials that have been delivered, but not part of the building, are covered, usually to a specified sub-limit.
Building Materials in Transit – All the goods you have ordered being delivered may be damaged on the way. These will be covered under your policy, as you have usually paid for the materials, so they are yours. This will be a similarly specified sub-limit.
Liability Coverage – A visitor or even a trespasser may be injured on-site, and may seek to make you legally responsible for their injuries. This coverage will cover this and other situations, including court defense costs. Some insurance companies may require the project to be fenced for additional safety.
Second, what kinds of COC coverages are there?
If you are a homeowner, and you will be moving into the home as soon as it is completed, there are insurance companies who will let you buy a one-year home insurance policy with an “under construction” rider. This great option lets you have flexible time, and automatically converts to a regular home insurance policy when it is built and you move in. During construction, restrictive coverage applies, which is lifted when you move in, and other normal homeowner discounts then apply.
If you are a builder, and building the house for someone else, or a “spec” home to be put up for sale upon completion, then you are buying more of a Commercial COC. The time you need to buy for is a little trickier to calculate.
Last, how long should I buy coverage for on a Commercial COC insurance policy?
First, COC policies must start when the construction starts. If you ask for the policy to start later, some insurers will decline, others will have you backdate the period to the start of construction anyway. Prepare ahead, and have coverage start when you pour foundations.
Commercial COC policies can be purchased for any number of months that you might want, plus you may be able to buy extensions.
Liability will be normally priced for the full year, despite how long you might think you need to build the home, if the construction lasts longer than one year, you will be charged this again.
Construction time – many houses “could” be built in 3-4 months if all goes well. With many possible delays from poor weather, availability of trades, delivery schedule of the home components, etc., extra time should always be purchased.
Maybe you plan to have coverage last until “lockup” when the building is completed. Two considerations should have you add time to your policy.
No one can purchase regular home insurance on the property until the Occupancy Permit is issued by the city. Sometimes scheduling this, and meeting all the requirements can add 4-8 weeks to your COC policy. Real Estate “escrow”
If you are truly building a “spec home, and the real estate market is not favorable when you complete, even with an Occupancy Permit, the home may sit until it is sold, with closing dates sometime months away. This time is called “escrow” when you just wait for paperwork to complete and money to transfer. You still need the property to be insured, and having enough time on your COC policy is important.
2. Awaiting to be sold.
Asking an insurance company for a short-term policy for a vacant, new home is almost impossible. Better to have purchased that time upfront.
In most cases, if you buy too much, you can cancel and get a refund. However, if you buy too little, for all the above reasons, you may not be able to get an extension.
Discuss your needs with an AMC Licensed Representative, and we will help you pick the right policy for your situation.