Many homeowners have never had the experience of building their own homes or of performing a major renovation. For this reason, they may be unfamiliar with construction insurance in New Jersey. Construction insurance, also known as builder’s risk insurance, is very similar to standard property insurance, but only covers the period of construction. Once construction is complete and the property is ready for habitation, the term of the builder’s insurance ends and the property insurance becomes active.
Standard coverage includes such protections as indemnification for damages to supplies and materials, as well as to the construction equipment involved. These are generally the limits contained in the insurance purchased by the general contractor. However, the homeowner is free to purchase additional coverage if necessary. This additional coverage can protect against such possibilities as flood or earthquake damage. It can also protect against the risks of delayed completion, including any income that may come as a result.
Because financing for home construction or remodeling is based on the value of the property, the lending institution has a stake in the risk as well. For this reason, most lenders will require that construction insurance in New Jersey be in place before the funds are released. In addition, they will often specify particular provisions that the policy must contain. Homeowners should factor in the cost of the insurance during the planning process of their home project.