Certain circumstances may warrant you having a different policy for your home than a standard home insurance policy. We will focus on 2 separate kinds of insurance policies; builders risk and vacant home insurance policies. We will discuss the differences of each so you can make an educated decision on what is best for you and your needs.
Builders Risk Insurance:
This is a policy that is either purchased by the owner or the builder on a home that is being built from the ground up. A builders risk policy will cover the home while it is under construction. Coverage is also extended to the materials and equipment that are being used to build the home.
Once the home is completed, the policy should be canceled and replaced by either a vacant home policy or a standard home insurance policy. Claims settlement payouts on a builders risk are based on the amount of construction that has been completed. This means that if you are insuring the home at $200,000 and home is 50% complete then they will payout $100,000. This is a very simplified explanation and a true value of the amount completed would be determined on the overall payout.
Vacant Home Insurance:
This is a policy that covers vacant homes that are unoccupied either because it is listed for sale, listed for rent or lease, under construction, or the home is currently not inhabited for other reasons.
It is very important that once a home is vacated for any of the said reasons, that you notify your insurance agent immediately to avoid any possibility of a denial of future claims.
If your home is unoccupied and a claim is filed under a standard owner-occupied policy, the claim can be fully denied or payouts can be significantly reduced. Most home policies request to be notified within 30-60 days from the home being vacated.
2 Types of Vacant Home Insurance Policies
- Vacant with RenovationsThis type of policy will cover renovations being done to the home as long as the existing studs and foundation are being used. Some policies require there to be a distinction if there are renovations being done or not so they can rate the policy accordingly. If you are building completely from the ground up, including new studs or foundation, you should purchase a true builders risk policy.
- Vacant without RenovationsThis policy is what you should choose if the home is not undergoing any renovations or construction and is either up for sale or rent. These policies are typically cheaper than builders risk policies or vacant policies with renovations since the risk level is typically lower.
If you have questions regarding what policy is right for you, please contact your agent before a loss occurs. Denials of claims or reductions in the total payout can be detrimental due to the large investment value of your home. Our agents are always available for any questions you may have for home insurance policies in NC or SC regarding the builders risk and vacant home insurance. Please contact us at 704-494-9495 anytime.