Guide to home insurance for new construction

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Home insurance for new construction is much the same as for an existing home, but it might cost you a lot less. Insurance companies charge lower rates for new construction.

Newly built homes use the newest materials, are built to current codes and have no wear and tear increasing the risk of a claim. As a result, home insurance rates for new construction are lower.

If you’re buying a new home, finding cheap insurance may be easier than with an older home.

Key Takeaways

There is no difference between home insurance for newly built homes and coverage for an existing home.
Insurers offer lower rates for new home insurance due to a lower risk of claims.
New home insurance is not the same thing as insurance for a home under construction.

What is new home insurance?

New home insurance is a term that is applied to newly built homes that are being occupied for the first time, but there’s really no difference in coverage requirements. However, there is often a difference in price because new homes are lower risk.

“Nearly every home insurance company is going to welcome a brand-new home with open arms,” said John Espenschied, owner of Insurance Brokers Group. “Because everything is new, the likelihood of having a (peril) claim, other than with weather, is very low.”

So, unless your new home is built in a high-risk area, such as the Florida coast, you can expect to find home insurance with ease and pay less for it.

What does new home insurance cover?

New home insurance covers the same things as any standard home insurance policy. These are the standard coverages included with every policy.

Dwelling coverage. This portion concerns your home and attached structures, such as a garage. It is calculated based on the replacement cost of your home.
Other structures. This part covers structures that aren’t attached to your home, such as a detached garage, a shed or a fence.
Personal property: This covers the property inside the home, including electronics, furniture, clothing and appliances. You can choose replacement value coverage of actual cash value. The former pays you to fully replace damaged and stolen contents. The latter reimburses for what the contents were worth at the time of the loss.
Personal liability: Personal liability coverage pays for injuries and damages to others for which you are responsible.
Medical payments. This coverage provides no-fault payments for medical bills when someone is injured on your property, and is meant for small incidents.
Additional living expenses: This covers you when you need to live somewhere else during repairs on a covered loss. It’s sometimes called loss of use coverage.

There are many additional coverages, such as sewer backup, identity theft and earthquake protection, that are available to add to the home policy. These are options you can choose to add.

When it comes to determining how much insurance you need, Loretta Worters, Vice President of Media Relations for Insurance Information Institute says, “The coverage depends on what it would cost to rebuild your home. It doesn’t differ from an older home.” Therefore, you’ll need to estimate the labor, materials and equipment costs for your home and other structures as well as the value of all your contents.

How much is homeowners insurance on a new home?

Insurance for a new home is cheaper than for an older home. Insurance companies offer large discounts to new homes.

The average cost of home insurance for dwelling and liability coverage of $300,000 and a $1,000 deductible is $2,601. With the new home discount, you can save an average of 42%. It’s often the largest discount available on home insurance.

“New homes usually have some discounts or lower pricing on insurance because you have new plumbing and electrical,” said Worters.

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Which company has the cheapest new home insurance?

The table below shows average rates from top companies with the new home discount, as well as the amount of the discount.

Company	Average premium	With new home discount	$ difference	% difference
State Farm	$2,255	$1,316	$939	41%
Farmers Insurance	$3,455	$2,399	$1,056	30%
Allstate	$1,838	$1,064	$774	40%
USAA	$2,349	$1,110	$1,239	53%
Nationwide	$2,735	$1,100	$1,635	54%
American Family	$2,178	$1,294	$884	41%
Travelers	$3,866	$1,743	$2,123	47%
Auto-Owners	$2,074	$1,395	$678	31%

New home insurance discount by company

Insurance for homes under construction vs. new home insurance

Insurance for a home that is still under construction differs from a homeowners policy for a house that’s complete and move-in ready. You’re going to need a builder’s risk policy to cover you during construction even if you’re hiring all the trades, buying the building material and acting as the new home’s general contractor.

Worters stressed to “make sure you purchase builder’s risk insurance” if you are the one in charge of “building” the home.

“It’s specifically designed to cover homes while they are under construction, typically covers theft and vandalism of the tools and equipment being used to build the house and materials, including in some cases materials being held off-site for future use,” she said. “The insurance doesn’t provide liability coverage or any protection for the home’s contents since there typically won’t be any personal possessions at the construction site.”

When to buy new home insurance

Once the build is complete or you’re buying a property from a builder’s inventory, you’ll need a homeowners insurance policy in place at the time that you take possession of the home.

“Make sure to have home insurance lined up before closing on the new home; premiums can vary from company to company,” said Espenschied. “You may own the property, but you’ve contracted with a general contractor to complete the project from start to finish. They will be responsible for delivering a completed home, and the general contractor would be liable for buying a builder’s risk policy. You are paying for a completed home.”

Do I need homeowners insurance for new construction?

When you’re insuring any home, new or old, make sure you get enough homeowners insurance to cover you if the unthinkable happens. If your home is being built, you’ll need home construction insurance. If it’s move-in ready and brand new, choose a standard homeowners insurance policy. Don’t forget to apply discounts based on the new build to significantly save you money.

Cynthia Bowman

Contributing Researcher

Cynthia Paez Bowman is a personal finance writer with degrees from American University in International Business and Journalism. Her work has been featured in MSN, Brex, Bankrate, Freshome, The Simple Dollar, GOBankingRates, and more. Cynthia is based between Las Vegas and Europe. In her spare time, she travels throughout Africa and the Middle East helping women entrepreneurs develop and grow their businesses.