Insuring a newly built home

A homeowners policy on a newly built house should be set to start on the day you close, not before. Until then the builder carries the insurance on the structure, usually a builder's risk policy, and your HO-3 takes over when the deed is yours. Two mistakes cause most of the trouble for new-home buyers: setting the dwelling limit from the purchase price instead of the cost to rebuild, and expecting the policy to pay for the builder's mistakes.

Everything below describes the ISO HO-3 (form HO 00 03 05 11). Your insurer's own form, your state's amendatory endorsements and your purchase contract control, so read the declarations page and the contract's risk-of-loss clause.

Who insures the house until you close

During construction the builder owns the house and almost always insures it under builder's risk coverage, a policy written for property that is being built. Builder contracts commonly keep the risk of loss with the builder until closing, and state default rules differ if the contract is silent. So find the "risk of loss" or "damage before closing" paragraph in your contract and read what happens if the house burns or a storm takes the roof off the week before you close. Contracts often give the buyer the choice of closing after repairs or ending the deal.

Your own homeowners policy is not designed to respond during this stage. The HO-3 excludes theft "in or to a dwelling under construction, or of materials and supplies for use in the construction until the dwelling is finished and occupied." A policy dated before you have any ownership interest is also paying for coverage on a house you have no insurable interest in, so most agents will not write one that way.

If you are the owner-builder, hiring subcontractors yourself or building on land you already own, the picture changes. Then you buy the builder's risk policy. That is covered in builder's risk insurance for a home under construction.

A timeline that works

Construction schedules slip, and insurers do not like binding coverage on a house that has not passed its final inspection. Work backward from your expected closing date.

1. Start 45 to 60 days before closing. Ask your agent, or any agent you are quoting with, to quote the home as a new purchase with the address, square footage, year built (the current year), roof material, foundation type and the features in the builder's spec sheet.
2. Ask what the insurer needs for final approval. Many insurers will quote a house from plans but will not issue the policy until the home has a certificate of occupancy or a passed final inspection. Find out the documents required and who sends them, because the builder will usually have them before you do.
3. Choose the effective date carefully. Set it for the closing date, and call the agent the moment the closing date moves. A date that passes before you close leaves you either uninsured on the day you take possession or paying for coverage you do not need.
4. Send the lender the proof it wants. Your lender and the closing agent will ask for a binder or evidence of insurance naming the lender as mortgagee. The Consumer Financial Protection Bureau notes that it is common to pay your first year's homeowner's insurance premium in advance at closing, and that your lender must deliver the Closing Disclosure three business days before closing (CFPB). Check the premium on that form against the quote you accepted.
5. Check the deductible against lender limits. As of 2026, Fannie Mae and Freddie Mac cap deductibles on required perils at 5% of the dwelling coverage amount and expect replacement cost settlement, with roofs the exception (Fannie Mae B7-3-02). In a hurricane state, a 5% wind deductible sits at that ceiling. See Fannie Mae and Freddie Mac homeowners insurance requirements.
6. Confirm flood insurance if the lot is in a mapped high-risk zone. FEMA waives the usual 30-day waiting period when flood coverage is bought in connection with a loan, so long as the application is made on or before closing and the premium reaches the insurer within FEMA's deadlines (FEMA Flood Insurance Manual, Oct. 2025). Miss the closing and the 30 days apply.

A caution on timing: insurers commonly stop binding new policies when a named storm is forecast to threaten the area. A closing scheduled for the middle of hurricane season is a reason to have the policy bound earlier.

Setting the dwelling limit on a new home

The price on your contract is not the dwelling limit. It bundles in things Coverage A does not insure and omits nothing a rebuild would cost. Start with a rough sort.

Here is a hypothetical. Say you contract for a 2,400-square-foot home at $520,000 and the lot is valued at $90,000. The building portion is roughly $430,000, or about $179 per square foot, before you subtract site work such as the driveway, well or septic system. That is a sanity check, not a final number. Build costs differ by region and by finish level, and a builder's price in a hot market may include a premium that a rebuild cost estimate would not.

Use the builder's itemized cost sheet if you can get one, then run the numbers in the home replacement cost estimator or ask the insurer for its own estimate and compare. The guide to How much dwelling coverage do I need? explains the inputs.

Two features matter more on a new home than an old one. Construction costs keep moving after you close, so ask about extended replacement cost and an inflation guard that raises the limit each renewal (extended and guaranteed replacement cost coverage, inflation guard and automatic coverage increases). And a new house is built to current code, which reduces the gap that ordinance or law coverage fills, but it does not eliminate it: codes change again before your first big loss.

Gather the paperwork that earns credits

New construction is the one time you can get documentation for features at almost no extra cost. Ask the builder for copies, and give them to your agent.

• Building permit and the certificate of occupancy
• Roof specifications: shingle wind and impact rating, deck attachment, underlayment, and any sealed roof deck
• Wind-resistance details, such as roof-to-wall connections and impact-rated windows or shutters
• Plumbing material (PEX, copper, CPVC), electrical panel brand and the water heater and HVAC model and date
• Smoke, fire and water-leak detection, and whether the home has a sprinkler system or monitored alarm
• Any FORTIFIED evaluation or designation paperwork

On FORTIFIED, the Insurance Institute for Business & Home Safety says a new FORTIFIED Gold home can add 1% to 3% to the total budget, plus a fee for third-party verification (FORTIFIED FAQ). Designation depends on the builder using certified contractors and an independent evaluator, so it has to be decided before the roof goes on. The FORTIFIED Home standard and insurance discounts explains the levels, and new-home and renovated-home discounts covers which credits insurers commonly give for new homes. Credit availability and size vary widely by insurer and state.

What the policy will not do: construction defects

A new house comes with a builder's warranty, and the warranty is where defects are handled. Your homeowners policy excludes "faulty, inadequate or defective" design, specifications, workmanship, construction and materials. The exclusion has an exception for what follows: the HO-3 says "any ensuing loss" not otherwise excluded is covered.

That distinction decides real claims. Say a plumber leaves a supply line fitting under-tightened and it begins to drip, then separates a year later and floods the kitchen. The policy would not pay to fix the fitting. It may pay for the water damage to the floors and cabinets, subject to the form's water-damage terms. Many insurers' own forms add an exclusion for continuous or repeated seepage, which is why a slow drip is treated differently from a sudden failure (sudden vs gradual water damage: where insurers draw the line). The form also excludes latent defect and mechanical breakdown, so a hidden flaw in a component does not become a claim just because the house is new.

Practical steps:

• Put defects in writing to the builder, with photos and dates, as soon as you see them. Many states have notice-and-repair statutes that require this before a lawsuit, and the sales contract and warranty set their own deadlines.
• Do not wait for the builder's warranty period to run out to report a leak.
• If a defect has already caused water or fire damage, report the damage to your insurer as well as the builder. Both can apply.
• Ask the builder's warranty provider what it covers and for how long. Terms commonly step up in tiers, with a short period for workmanship and longer ones for systems and structure, but the contract controls.

Before you move in

Many buyers close, then spend weeks painting, installing flooring and moving in. A newly closed, empty house can run into the policy's vacancy terms. The HO-3 excludes vandalism and glass breakage if the dwelling has been vacant for more than 60 consecutive days before the loss, and many insurers' own forms are stricter. The form also says "a dwelling being constructed is not considered vacant," which protects the builder stage, not the period after you take title and before anyone lives there. Tell the agent your move-in date. vacancy and unoccupancy exclusions explains how insurers draw the line.

Contractors who return to finish the punch list or do your upgrades are a liability exposure too. Ask for certificates of insurance from anyone working at the house, and see injured contractors and workers at your home.

Key takeaways

• The builder insures the house until closing; set your HO-3 to take effect on the closing date and move it if the date moves.
• Base the dwelling limit on rebuild cost, not the contract price: exclude the land, include the builder's profit, and add extended replacement cost.
• Your lender needs proof of insurance before closing, and Fannie Mae and Freddie Mac cap required-peril deductibles at 5% of dwelling coverage as of 2026.
• Defects are the builder's and the warranty's problem. Your policy may pay for the ensuing damage, not the faulty work.
• Collect permit, roof, wind and plumbing documents from the builder; they earn credits that are hard to document later.