5 Types of Insurance You Need When Building a House

When building a house, there’s more to consider than how many bedrooms you want or which paint colors you prefer. You also need to think about potential risks and how to mitigate them once construction begins. As a homeowner or contractor, it’s important to understand the following types of insurance and determine whether they’re relevant for protecting your construction project.

Builders’ Risk Insurance

If you’ve hired a construction company, ask whether they carry builders’ risk insurance—also known as course of construction insurance—while completing your home build. This type of coverage, sometimes referred to as contract works insurance, is a specialized property policy that protects buildings and materials during the construction or renovation phase.

Most builders’ risk insurance policies cover the structure while it’s under construction, as well as materials and supplies located on-site, stored temporarily elsewhere, or in transit. Coverage may also extend to fees for surveyors and architects after a loss. In many cases, builders’ risk insurance includes protection against damage caused by fire, theft, vandalism, and other common perils, along with debris removal and increased labor costs associated with rebuilding.

However, builders’ risk insurance typically does not cover losses resulting from faulty materials, design flaws, or poor workmanship. It also generally excludes employee injuries, tools and equipment, normal wear and tear, and third-party property damage liability. These risks require separate insurance policies.

General Liability Insurance

Project owners and self-builders can find themselves in a vulnerable position during a construction project. You’re responsible for maintaining a safe environment for everyone on-site, including delivery personnel, visitors, and even trespassers. If someone is injured and you’re found legally liable, the financial consequences can be significant.

General liability insurance helps protect against these risks. It covers third-party bodily injury claims—such as someone tripping on the construction site—as well as property damage, personal or advertising injury, and legal defense costs.

Workers’ Compensation Insurance

Although workers’ compensation insurance is not typically required for owner-builders, it is essential for general contractors who directly hire employees or tradespeople. This coverage pays for medical expenses and lost wages if a worker is injured on the job. If you’re a property owner hiring a contractor or construction company, it’s reasonable—and wise—to ask whether they carry workers’ compensation insurance for added peace of mind.

Commercial Auto Insurance

Often overlooked, commercial auto insurance is critical for many construction companies. It provides coverage for vehicles used specifically for business or construction-related purposes. This type of insurance can cover bodily injury and property damage liability, medical payments, and physical damage to vehicles.

Inland Marine Insurance

Inland marine insurance, commonly known as tools and equipment insurance, is a specialized policy that protects mobile property regardless of location. Tools and equipment used at temporary job sites, stored in vehicles overnight, or transported between locations are typically covered. With inland marine insurance, you can have peace of mind knowing your equipment is protected against theft, accidental damage, vandalism, fire, and floods.

Insurance may be the last thing on your mind during a construction project, but it’s a critical consideration before work begins. By securing construction-related coverage such as builders’ risk, general liability, workers’ compensation, and inland marine insurance, you can protect yourself from financial losses stemming from accidents, legal claims, or unexpected incidents.