Construction Insurance – Are You Covered?

Before you embark on a construction project, you should understand the different types of insurance that you need. Choose the right types of policies and coverage to protect you and your family. If you use a general contractor, then make sure that the contractor’s business has at a minimum:

  1. Commercial General Liability with at least $1,000,000 per occurrence and $2,000,000 aggregate coverage — This liability coverage gives you some protections after your home is completed and you have taken possession.
  2. Workers compensation coverage – If a builder’s or sub-contractor’s employee is injured on your jobsite, the builder’s workers compensation coverage should prevent you from getting pulled into a claim or lawsuit as a result of that injury. It stops the claim at the builder’s workers compensation policy. EVERY general contractor or home builder in Tennessee should always have workers compensation coverage whether they have any employees or not.

These two insurance policies will help protect you while your builder has control of the property and is building the home. You should receive a certificate from the insurance carrier – not the builder – that shows the coverage amounts and the policy numbers. Commercial Umbrella Liability is also a good idea. This gives the contractor more liability coverage above the standard $1,000,000 limit.

A specific policy called Builders Risk Coverage should also be purchased for your construction project. This insures the home for damage while it is under construction for events that might happen such as fire, lightning, wind storm, vandalism, etc. This policy will typically cover most things other than earthquake and flood (which can be either added to the builders risk policy or bought separately). Your contractor should be able to obtain a builders risk policy that is the broadest coverage available and the price is usually very reasonable. This policy will cover the structure until you take possession of the home.  

If you own the lot or land that the new home is being built on, then you should check with your current homeowner’s insurance company/agent to be sure that your current Homeowners/Renters Liability Coverage will extend to protect you for your ownership of the property while it is under construction. Also check that your current homeowner or renter policy will provide at least 30 days automatic coverage for contents if you start moving smaller personal items into the property before you actually close on the home and start the homeowner coverage on your new home. If this will take longer then be sure to discuss with your agent to be sure you are covered. While the exposure is small, it is best to be sure. This is also one of many reasons that you should carry or consider adding a Personal Umbrella Policy to your personal coverage. These are usually very inexpensive and give you $1,000,000 or more in additional liability coverage when you need it.

Finally, insure your new home to the total cost to rebuild it. There is no need to insure the value of the land in that coverage. You want to make sure that your homeowner’s policy provides guaranteed replacement cost coverageon the building and replacement cost coverageon your contents. Hopefully this helps sort out the different insurance types and coverage that you need and you can move on to the next steps of your construction project.

This article was written by David Fleming of Spann Insurance and Judith Johnson of Brentwood Builders. For more information about your insurance needs, contact David at Spann Insurance at 615-366-1200 or e-mail him at