Building your dream home is an exciting journey for your family. The vision of creating lasting memories in a space designed just for you brings genuine happiness. Before turning these dreams into reality, careful planning is essential to protect this significant investment.
Constructing your own home presents both incredible rewards and unique challenges. This guide will help you navigate the process and ensure your project is well protected from start to finish.
How To Build Your Home
- Define Your Vision
One major advantage of building new is complete customization. Gather inspiration from online platforms, home magazines, and design websites. Create a dedicated idea board or folder to visualize your perfect home’s style and features.
- Select Your Floor Plan
With your vision taking shape, choose your floor plan. This foundational decision determines your home’s size, style, quality, and features. Whether selecting from a builder’s catalog or designing custom plans, have a local general contractor or architect review and approve the layout before construction begins.
- Calculate Cost Per Square Foot
To establish realistic expectations, calculate construction costs per square foot. Divide the builder’s total estimate by your home’s planned square footage. Compare this figure with recently built similar homes in your area by subtracting land value from sale price and dividing by square footage. This comparison helps verify your builder’s estimate is reasonable.
- Prepare for Unexpected Costs
Construction delays and unexpected issues are common. For example, let’s say that the lumber used to build your home was left exposed to the elements during an unexpected rainstorm that lasted several days. You’d need to replace the wood otherwise your new home would likely have mold and structural issues.
Budget for additional days of labor, replacement of damaged materials, and equipment losses. A contingency fund covering 10-20% of your total budget helps manage these surprises without derailing your project.
- Hire a Knowledgeable Real Estate Agent
Assemble your professional team starting with a qualified real estate agent. They represent your interests throughout the building process, offering valuable insights into land acquisition, contracts, and local regulations.
- Choose the Right Builder
Select a builder with specific experience constructing homes like yours. Verify they carry proper insurance and bonding, including:
- Workers’ Compensation: Protects employees injured on the job
- General Liability: Shields the company from potentially bankrupting lawsuits
Ask whether they use independent subcontractors and verify all licenses and bonds. See if you can verify the quality of their previous work.
This due diligence ensures you hire an experienced, reputable team.
- Understand Your Construction Contract
You’ll work closely with your builder for months. Establish clear expectations by detailing all project requirements in your contract, even items not specifically mentioned. A comprehensive contract clarifies responsibilities, provides accurate cost estimates, and transparently shows where your money goes.
Protecting Your Investment: Builders Risk Insurance
What is Builders Risk Insurance?
Builders risk insurance, also called course of construction insurance, protects your project during the building phase.
Who Purchases Builders Risk Insurance?
Typically purchased by:
- The property owner
- Builder
- General contractor or subcontractor
- Architect
This coverage safeguards the structure, materials on site, and equipment waiting for installation.
What Does Builders Risk Insurance Cover?
- Financial Protection: Covers the current value of your project, including labor costs, if damage occurs from covered events like fire, theft, or severe weather
- Project Continuity: Helps keep construction on schedule and within budget after a loss
- Risk Management: Provides peace of mind knowing your investment is protected during the vulnerable construction phase
Even with Builders Risk Insurance, you’ll still need to keep a contingency fund covering 10-20% of your total budget for your home.
Insurance is used for catastrophic events and often comes with exclusions. Keeping this fund on hand ensures that if the insurance policy can’t cover the full scope of the damages, you can.
What to Consider When Getting Coverage
- Policy Limits: Ensure coverage equals the completed value of your project, accounting for inflation
- Coverage Duration: Verify the policy extends through final inspection and handover
- Specific Perils: Understand exactly what causes of loss are covered
- Deductibles: Know your out-of-pocket costs if you need to file a claim
- Additional Insured: Consider adding yourself as an additional insured party if the policy isn’t your own
No matter your project’s scope, understanding and securing proper insurance before construction begins, is crucial. Discovering coverage gaps after an incident can be financially devastating.
ONYX Insurance Brokers specializes in new construction protection. Contact us today to discuss your project’s specific insurance needs and ensure your dream home is properly safeguarded from groundbreaking to move in day.
