Think about what kind of insurance you personally have. It might be commercial auto insurance for your car, for instance, which is required by law. The purpose of car insurance is so that drivers can handle the financial responsibility of vehicle-related incidents. This same principle applies to other types of insurance, including those that are expected of construction industry professionals.
Types of Insurance for Home Builders
You have decided that you are ready to work on a custom home with a design-build company. But before the project can begin, you need to verify that this company is fully insured. This means requiring them to show you their certificate of insurance, which details their coverage in place. Here are five insurance types that top home builders in Texas may have (and are certainly not limited to).
Workers’ Compensation
Construction workers are extremely susceptible to injuries. They could get electrocuted or slip and fall. When your contractor fails to get the proper insurance, their business is put at risk of being indefinitely responsible for paying for that worker’s medical bills. With workers’ compensation, often shortened to workers’ comp, that contractor is covered. This insurance type covers costs relating to medical expenses, legal fees, and missed wages.
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Builder's Risk
Sometimes called construction loan insurance or home building insurance, builder’s risk is designed to protect construction sites, typically lasting nine to 12 months. The construction site has a different set of requirements than a completed home. Even the top home builders in Texas may experience situations that result in property damage during construction. This includes inclement weather, such as hail, lightning, and hurricanes. Vandalism and theft also fall under this branch of risk management.
General Liability
Protecting your business, regardless of your industry, is the key to your overall success. A general liability policy encapsulates both bodily injuries and property damage that occur during normal operations. Another thing that it covers is slander so that your business is able to defend costs when sued. For home builders and remodelers, general liability covers a broad range of job-related damages. They may be required by law to purchase this insurance, or else win a contractor that requires it.
Professional Liability
Also known as errors and omissions insurance, professional liability insurance provides coverage for businesses against claims due to errors in their work. Because it often does not come with other insurance policies, this will need to be purchased separately. This type of insurance is becoming more common amongst design-builders who need to ensure the quality execution of their design. If an engineer were to make an error when calculating a home’s structural requirements, it could result in big problems later on.
Construction Bonds
When you commit to working with one of the top home builders in Texas, they need to guarantee certain aspects of your contract. Doing so will give you greater peace of mind throughout the process. Contractors can get several types of construction bonds. One example is performance bonds. These ensure that contractors will adhere to industry standards and complete the project that was laid out in the contract. Supply bonds are also important because they provide assurance that suppliers will deliver materials according to the contract. And we cannot forget about subdivision bonds which guarantee cities and counties that the home builder will be considerate of local guidelines.
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What Factors Affect Insurance Costs?
No two home insurance companies are the same in terms of pricing. That being said, you are still able to gather ballpark estimates for insurance types, thanks to information provided by underwriters. Underwriters are members of a financial organization who evaluate the risks of a particular party. They calculate insurance costs based on a construction company’s annual revenue, location, number of employees, and type of contracting services. Even the amount of equipment and property owned are influential factors. Ultimately, the top home builders in Texas are part of a high-risk business. Home building is prone to a higher chance of injuries and property damage. So, an underwriter will take all of this into consideration to determine premiums.
Fun Fact: The median annual cost of general liability insurance in Texas is $1,761. The national median is only $1,342.
Requirements of Construction Insurance
The top home builders in Texas should be familiar with the common policies in the state. Not every state has the same requirements for insurance. Further, insurance requirements vary based on the size of a business. While many types of insurance are not demanded by state or federal law, it is the case that many construction contracts expect the contractor to purchase it. For instance, in Texas, workers’ compensation insurance is needed by businesses that do work for public employers.
Do I Need Homeowners Insurance?
A standard homeowners insurance policy is different from new construction insurance. At the end of the day, there is no law that requires you to get a standard homeowners insurance policy. However, if your home is being custom-built by one of the top home builders in Texas, the contractor will expect it. Many home insurance companies offer specific policies for properties under construction. Another note is that mortgage lenders will not agree to finance your home purchase without it. This is because homeowners insurance is a lender’s way of protecting their investment. Your policy safeguards the structure of your home while providing coverage for additional living expenses. This ongoing financial protection will be incredibly beneficial for your largest asset.
As one of the top home builders in Texas, Bat City Builders is committed to executing the smoothest projects possible. Our team has several years of experience under our belts, and we are continuing to educate ourselves on best construction practices every day. With our transparent and efficient services, you are sure to get the most out of your custom home. Plus, we will do it all safely because we know the importance of insurance! Get in touch with us now to discuss your hopes for your home.