A home under construction can be an exciting prospect. The owners are looking forward to a structure tailored to their goals and vision, and the contractors are tackling an engaging and unique project that keeps them busy.
However, while homes are still in construction, they are prone to damage that fully-built structures may be more resistant to. Remember—a house under construction may not have walls or all of the protective structures that completed buildings rely on for security.
Because new construction projects are vulnerable to more types of damage and Mother Nature is hardly predictable, contractors and homeowners need to collaborate on which types of insurance protection are most important at each stage. Natural disaster coverage is an often overlooked but essential element in securing a residential construction investment against damage or destruction.
Here is an overview of natural disaster coverage in residential construction and how this insurance policy helps ensure a residential project’s successful completion.
Do You Need Natural Disaster Coverage?
While building a new home is an extensive process, such a project may span anywhere from six months to a little over a year and a half. What are the odds that a natural disaster will strike during this narrow time frame? As it turns out, the chances may be higher than you think.
Between 2013 and 2023, more than 88% of all counties in the United States declared a natural disaster, as did 95% of the most populous counties in the country. In 2022 alone, 18 natural disasters struck the US, resulting in more than $1 billion in damage each time.
This number has steadily increased, from an average of 6.8 disasters per year in the 2000s to an average of 20 per year over the last three years. Given this information, it is not unreasonable to plan for and anticipate that a natural disaster could strike while residential construction is underway.
Coverage for natural disasters comes as its type of insurance separate from property protection. It is specifically targeted toward weather and climate events and can compensate for residential construction damaged or destroyed due to such an event.
Be sure to read the contract to understand when this type of insurance may work, as insurers may require that a natural disaster be declared or that a certain monetary value in damages be assessed by survey before a claim can be filed.
Why Not Use Homeowner’s Insurance for Natural Disasters?
Most people assume that a homeowner’s insurance policy will cover any damage to a structure. However, a few problems arise when covering new residential construction with standard homeowner’s insurance.
Many insurers will not provide homeowner’s coverage until construction is completed. Additionally, homeowner’s insurance does not include protection from most damages incurred during natural disasters, such as flooding, hail, and earthquake damage.
Other Important Insurance Protections for Residential Construction
Natural disaster insurance is a wise choice for most residential construction projects because of the difficulty in relying on homeowner’s insurance and most insurers’ unwillingness to issue it before construction completion. However, this is not the only type of coverage that residential construction projects can benefit from.
Builders’ risk insurance is one of the most common types of protection contractors rely on during residential construction. This insurance also addresses many of residential structures’ vulnerabilities before completion, such as vandalism, fire, and theft of exposed property. This complements a natural disaster policy well to provide broad-spectrum coverage.
Additionally, many contractors will elect to carry E&O (errors & omissions) insurance. They can face legal and financial repercussions if the builder makes a mistake in interpreting the architectural schematics, abiding by building codes, or enacting a build as the client expects.
The contractor may be required to return to the site and fix the problem at their own expense. E&O insurance protects these situations so the issue can be resolved without further problems or delays.
Get Comprehensive Insurance Protection from the Pros
Natural disasters can strike anytime, and residential construction projects underway during this time are at a significantly increased risk of heavy damage or even destruction. This is why securing natural disaster insurance is a smart choice.
The experts at Burton & Company can help you explore your options for natural disaster protection and how it fits alongside other insurance coverage during the building process. Contact Burton & Company to schedule an appointment or ask questions about the right insurance.