You might remember an earlier article of mine, explaining the importance of home insurance. I wrote a little snippet about a neighbor’s vacation home that burnt to the ground, and sadly, the homeowners weren’t adequately insured. In this day and age, it’s pretty uncommon for homeowners to lack insurance as most lenders and mortgagers required a pretty stringent policy.
However, there are those that have insurance and it’s just simply not adequate enough.
When you buy an existing home it’s common sense, and often at times required, that you purchase an insurance policy that will cover the amount of money you owe to the lender in the event that an accident should befall the house.
What’s not necessarily common sense is the type of insurance needed when you are building a new home. A new construction is a whole other ball of wax. Often times the type of loan, insurance, and home buying process is a vastly different experience from buying a pre-existing house.
When you are looking to build a new home, the odds are you still have plenty of money on the line. Most builders and construction companies won’t break ground without a sizable down payment and full loan approval if needed. Just because you provide the money to the construction company doesn’t mean that you are now absolved of all responsibility and liability when it comes to the building process, and that’s a common misconception that many people have.
There are plenty of companies out there such as Aviva, Canfinse and CRL to name a few that can help provide necessary construction insurance you are going to need in order to ease your mind of worries during the building process. What sort of worries, you might ask?
First and foremost, there is the potential of structural defects. This could include an unstable foundation. The foundation of a home is the most essential part of the construction process. If it’s found unstable it can lead to everything from cracks in the cement, to flooding, and even electrical worries as well. Next, you have road bond assurances and guarantees.
Most modern homeowners have the expectation of paved roads, sidewalks, and city sewer systems that lead to their homes. There is also an expectation that a city or county will work with the builders to approve and construct these modern conveniences.
However, we know that isn’t always the case. This is precisely why being insured for this unknown approvals can protect your funds that you have invested as a down payment during the construction process. Likewise, as a buyer, you have a natural expectation that the builder has gotten all of the necessary permits and obtained approval from local authorities.
You also need to keep in mind that the unforeseen can happen at any time. Let us not forget about the financial meltdown less than a decade ago. This was referred to as the ultimate “housing bubble”. Real estate prices were skyrocketing and building permits were hitting an all-time high. Then the unthinkable occurred. The bubble popped and many potential homeowners were getting turned away from lenders and this has a snowball effect on construction companies that were in the thick of building new neighborhoods. These companies simply became insolvent, and it was nothing to drive down the street and find half built homes and subdivisions that were overwrought with brush and debris. You must have insurance to protect you for every possible scenario, even if for nothing more than your own peace of mind.
When you make a big investment in something such as real estate, it is a forgone conclusion. Thanks for reinforcing that in this post.