Do I Need Homeowners Insurance During Construction?
Not yet. A home under construction needs a builder's risk policy. Homeowners insurance starts once it's finished and occupied.
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A standard homeowners policy covers a finished, lived-in house, so it typically won't pay out for a house still being framed or wired. That gap is what builder's risk coverage is for, usually arranged by the builder or the person holding the construction loan. Once the house passes final inspection and someone moves in, that policy ends and homeowners insurance takes over. Your lender will want proof of that homeowners policy, with dwelling coverage matching what the house cost to build, in place before closing.
Dwelling coverage has to match what it actually cost to rebuild the house, not the purchase price or the loan amount, and insurers price that figure differently. One quote might lowball the rebuild cost and leave you underinsured after a fire. Another might set the deductible or dwelling limit in a way that fits your closing date and your lender's requirements without you overpaying for coverage you don't need yet.
What happens to the builder's risk policy at closing
The builder's risk policy doesn't just expire on its own. Someone has to cancel it, usually the builder or whoever took out the construction loan, once the homeowners policy is active and the house has changed hands. If nobody cancels it, you could end up with two policies running at once, which means paying for coverage you don't need. Ask the builder or the title company who's responsible for closing that policy out, and get it in writing if you can.
The timing matters more than people expect. Your homeowners policy needs to start on or before the day you close, not after. Lenders usually ask for proof of that coverage, often called a binder, a few days before closing so they can confirm it before funding the loan. If there's a gap between when the builder's risk policy ends and your homeowners policy begins, even a day or two, the house sits uninsured during that window. That's a risk nobody wants to carry, especially right before you move in.
Final walkthroughs and inspections can push a closing date back, and that shift affects both policies. If your closing moves, the start date on your homeowners policy needs to move with it. Most insurers can adjust this without trouble, but it has to happen before the new closing date, not after. It helps to tell the insurer as soon as you know the date has changed, rather than waiting until the week of closing.
Dwelling coverage set during construction should reflect the finished house, including any upgrades or changes made along the way. If the final build cost more than the original estimate, whether from upgraded fixtures, a finished basement, or a change order midway through, that number should carry over into the dwelling coverage on your homeowners policy. A builder's final cost statement or the appraisal done for the loan usually has this figure. Using the original estimate instead of the final one is a common way people end up underinsured from day one.
What if you're buying an already-finished new construction home
Not every new build involves a construction loan or a builder's risk policy you need to track. If you're buying a house that's already complete, maybe a spec home a builder finished before listing it, or new construction that sold to someone else first, you're in the same position as any other buyer. You need homeowners insurance in place by closing, full stop. There's no builder's risk policy to hand off or cancel because the house was never under your name while it was being built.
The dwelling coverage question still matters here, maybe more than people expect. A brand-new house doesn't have a sale price that reflects what it would cost to rebuild, especially if the builder priced it to move fast or bundled in incentives. Ask the builder for the actual construction cost, not the listing price, and use that as your starting point. Some builders will give you a cost breakdown automatically. Others won't unless you ask directly.
New homes also come with details that affect coverage in ways older homes don't. Updated electrical, plumbing and roofing usually mean lower risk of certain claims, and some insurers price that in. On the other hand, if the house includes features like a pool, a finished basement, or higher-end fixtures than a typical home its size, those add to the rebuild cost and should show up in your dwelling coverage. The builder's specs sheet or the appraisal report usually lists these, and it's worth checking that whatever figure you give the insurer reflects the house as built, not a generic estimate based on square footage alone.
Warranty coverage is the other piece worth knowing about. Most new construction comes with a builder's warranty covering structural issues or defects for a set period, often separate from anything your homeowners policy touches. That warranty doesn't replace insurance and doesn't cover things like fire, storm damage or theft. It's meant for problems with the construction itself, like a foundation issue or a failing system that shouldn't have failed yet. Knowing where the warranty ends and your homeowners policy begins helps you avoid filing a claim for something the builder should be fixing instead, and avoids leaving a gap where neither one applies.
Before you sign anything
Check your closing date against the start date on your homeowners binder. They should match exactly. If the closing moves, call to update that date rather than waiting until the week of.
