My bank is asking for a builder’s risk policy that shows a year of coverage. My builder says since I own the land outright, they don’t need it, and it’s up to me. But the bank doesn’t seem to think it’s optional.
Does anyone have experience with this? Is the builder right, or do I need to get it because the bank says so?
If the bank is asking for it, you really don’t have a choice. They hold the money, so they set the rules.
And to be honest, you want builders risk anyway—it’s like having insurance on your house while it’s being built. You wouldn’t leave your finished home without insurance, right?
You definitely need builder’s risk insurance. It’s what covers the house while it’s being built.
AssuranceAdvisor said:
You definitely need builder’s risk insurance. It’s what covers the house while it’s being built.
It covers the house, materials on-site, and more—pretty much everything that’s part of the project. Your builder doesn’t seem to know what they’re talking about, which is concerning.
@Lyle
Yeah, sounds like the builder is inexperienced or cutting corners.
Fintan said:
@Lyle
Yeah, sounds like the builder is inexperienced or cutting corners.
We didn’t even have a contract until recently when I needed a construction loan. It started off casual, like ‘hey, you want to be my GC to speed things up?’ He said sure, and we agreed on 10%.
@Zinn
That’s a red flag… might be time to look for a more experienced GC.
As a private lender, I’d be very wary of this builder. The builder’s risk policy covers everything during construction. If something happens, like a fire or storm damage, and you’ve already paid the builder, is he going to rebuild for free? Probably not.
The bank wants to protect their investment—and you should too.
@Blaine
The builder might just mean that since you own the land, it’s up to you to get the insurance. He probably doesn’t need it himself.
Rin said:
@Blaine
The builder might just mean that since you own the land, it’s up to you to get the insurance. He probably doesn’t need it himself.
That’s possible. But I’ve had builders tell people they don’t need insurance until the house is finished, which is risky advice.
You buy the policy to protect the house while it’s under construction. Think of it like homeowner’s insurance, but for a house that isn’t built yet.
If something like a storm knocks down your half-built house, the policy pays to rebuild it.
Exactly! If a storm or fire destroys your house during construction, the builder’s risk insurance will cover it. Even if it’s optional, you don’t want to skip this.
Your builder is wrong. You need builder’s risk, and it’s usually pretty affordable. If something crazy happens on your property, like a fire or theft, it’ll protect you.
Monroe said:
Your builder is wrong. You need builder’s risk, and it’s usually pretty affordable. If something crazy happens on your property, like a fire or theft, it’ll protect you.
How much should I expect to pay for a $500k build in GA? Any good insurance companies you’d recommend?
@Indigo
I paid around $300-400 for mine a few years ago. Call your insurance company and ask.
@Indigo
I was quoted $1000, but the policy didn’t cover what the bank wanted. I went through a broker and got it down to about $1500 for a year.
If something goes wrong during construction, you’ll want to be covered. Your builder’s risk policy is there to protect you and the bank’s investment. Better safe than sorry.