Building a home involves financial risk from theft, fire, severe weather, and job-site accidents. State Farm new construction insurance protects your property and financial investment while a house is under construction. Knowing how this coverage works, who must buy it, and when to transition to a standard home policy ensures your build stays protected from groundbreaking to move-in day.
What Is State Farm New Construction Insurance?
State Farm covers homes under construction primarily through specialized policies commonly known as builder’s risk insurance, alongside premises liability options. A standard homeowners insurance policy covers completed structures and personal belongings, but insurers generally do not write traditional home policies for incomplete buildings.
New construction coverage protects the physical structure as it is built. It extends protection to raw building materials, fixtures, machinery, and temporary structures located on the site. Coverage kicks in as soon as materials arrive at the property or when construction begins.
What Coverages Are Included?
State Farm new construction insurance covers physical losses from specific perils and offers liability protections tailored to active build sites.
- Physical Structure and Materials: Protects the framing, foundation, roof, plumbing, wiring, and uninstalled materials stored on-site against fire, lightning, windstorms, hail, explosions, vandalism, and theft.
- Premises Liability: Protects property owners against third-party bodily injury claims or lawsuits if a non-employee or visitor is injured on the active construction site.
- Debris Removal and Clean-Up: Covers expenses required to clear damaged building materials following a covered event like a fire or storm.
- Soft Costs (Optional Add-ons): Helps cover indirect financial losses resulting from construction delays caused by a covered peril, such as extra loan interest, real estate taxes, or extended permit fees.
Who Is Responsible for Purchasing the Policy?
Responsibility for purchasing insurance on a new construction project depends on the contract between the property owner and the general contractor. In custom home builds, either party can obtain the builder’s risk policy, but both parties—along with the construction lender—must be named on the policy to protect their financial interests.
If a professional builder construct a tract home on land they own, the contractor carries the construction insurance until closing. If you purchase the land yourself and hire a custom builder or act as your own owner-builder, you are typically required by your construction lender to secure insurance before work begins.
Contractors must also maintain their own general liability insurance and workers’ compensation coverage for their crews, as owner-purchased construction insurance does not cover workplace injuries sustained by hired trade workers.
Factors Influencing Cost and Coverage Terms
State Farm calculates premiums for new construction insurance based on the total replacement cost of the completed structure rather than the market value of the land. Generally, builder’s risk coverage ranges from 1% to 4% of total construction costs.
Key factors affecting overall cost include:
- Project Budget and Square Footage: Higher building valuations require higher coverage limits, which increases the policy premium.
- Construction Materials: Framing built with fire-resistant materials or steel generally costs less to insure than traditional wood-frame construction.
- Geographic Location: Build sites located in areas prone to severe weather, wildfires, windstorms, or high rates of property crime carry higher rates.
- Policy Duration: Policies are written for short terms, usually 6 to 12 months. Longer terms or extensions increase overall insurance costs.
Common Policy Exclusions
While State Farm new construction coverage is broad, it does not cover every potential issue on a job site.
Common exclusions include:
- Subcontractor Injuries: Construction crew injuries fall under the contractor’s workers’ compensation policy, not the property owner’s policy.
- Faulty Workmanship or Poor Design: Damage caused by improper installation, structural errors, or bad architectural designs is excluded.
- Floods and Earthquakes: Natural ground movement and surface water flooding require separate policy endorsements or standalone flood and earthquake policies.
- Wear and Tear or Mechanical Breakdown: Internal equipment failures or natural weather degradation of exposed, unfinished materials over extended periods are not covered.
Transitioning to Standard Homeowners Insurance
A new construction policy is temporary and remains active only during the active building phase. Once construction finishes and local authorities issue a Certificate of Occupancy, the build site officially converts into a habitable dwelling.
At this stage, you must notify your State Farm agent immediately. The agent will cancel or expire the builder’s risk policy and convert the coverage into a traditional homeowners policy. This transition ensures uninterrupted coverage for your new home’s structure, personal belongings, loss of use, and permanent personal liability.
Next Steps for Homeowners and Builders
To set up new construction insurance with State Farm, gather your build specifications before reaching out to an agent. You will need your construction contract, total estimated budget excluding land cost, architectural blueprints, estimated start and completion dates, and lender requirements. Securing your policy before breaking ground prevents coverage gaps and ensures compliance with your construction loan.
