A couple in Vero Beach spends eighteen months building a custom home on the Indian River. The builder carried builders risk through construction, the certificate of occupancy comes through on a Thursday, and the movers are booked for the following week. On Monday the builder’s agent mentions that the builders risk ended at completion. The homeowners application has been sitting half finished since spring, and a tropical storm is forecast to reach the Treasure Coast by the weekend.
Building a custom home involves two insurance policies that have to meet with no space between them. Builders risk covers the house while it is being built. A homeowners policy covers it once it is finished. Most of the problems on custom builds come from the transition, not from either policy on its own.
Who Carries Builders Risk on a Custom Home
On a custom home, builders risk is bought either by the builder or by the owner, and the contract usually says which. Many builders carry it and build the cost into the contract. Others require the owner to buy it, and owners acting as their own builder always need to.
If the builder carries it, the owner should be named on the policy and should see the declarations page, not just a certificate. Three things are worth checking: that the limit reflects the full completed value of the home, including upgrades and change orders; what the named storm deductible produces in dollars; and exactly what event ends the coverage.
If the owner carries it, the same questions apply, plus one more: whether the builder and major subcontractors are named with a waiver of subrogation, so the carrier cannot pursue them after paying a loss they caused.
On a high-value home, some carriers will write the house on a course-of-construction homeowners policy that covers it through the build and then converts to a standard homeowners policy at completion. Where that option is available, it removes the transition problem entirely, because one policy covers the home from the start.
The Limit Grows With the House
A builders risk limit should be set to the completed value of the home, not its value when construction starts. A loss late in the build destroys nearly the full value of the house, and a limit written to an early budget will fall short.
Custom homes are especially prone to this because the scope changes. Upgraded finishes, added square footage, a larger pool and a new outdoor kitchen are common, and none of them raise the builders risk limit automatically. Every significant change order is a reason to check the limit. Our article on change orders, inflation guard and extra expense on builders risk explains how a policy can keep pace with the project.
In Florida, Wind Is the Main Exposure
A house under construction is far more vulnerable to wind than a finished one. Before the roof is dried in and the windows and doors are installed, the structure has openings everywhere and materials on site that can become debris.
Builders risk policies in Florida carry a named storm deductible, usually a percentage of the limit. On a two-million-dollar home, a five percent deductible is one hundred thousand dollars. That figure deserves attention before the policy is bound, because it is what the owner or builder funds after a storm. Carriers may also stop binding new builders risk once a storm is in the forecast cone, so coverage needs to be in place well before hurricane season, not arranged in a hurry during it.
When Builders Risk Ends
Builders risk ends at a defined point, typically completion, occupancy, acceptance by the owner or a stated expiration date, whichever comes first. The exact trigger is in the policy, and it is often earlier than owners expect.
Occupancy is the trigger that surprises people most. Moving furniture in, storing belongings in the garage or staying in the house before final completion can end the builders risk while punch list work is still underway. If the owner plans to move in early, the carrier needs to know in advance.
The opposite problem is just as common. A project that runs past the policy’s expiration date can leave the house uninsured during the last weeks of construction. Extensions are usually available, but they must be requested before the date passes.
Getting the Homeowners Policy Ready Early
The homeowners policy should be quoted and ready to bind before the builders risk ends, and on a Florida custom home that takes more time than most owners allow.
Carriers writing high-value homes will want the construction details, the final replacement cost and often an inspection. A wind mitigation inspection at completion documents the roof attachment, roof-to-wall connections and opening protection built into a new home, and those features can earn meaningful credits on the wind portion of the premium. Waiting until after closing to schedule it costs money. Our article on wind mitigation inspections explains what inspectors check.
The dwelling limit on the homeowners policy should reflect what it would cost to rebuild the home, which on a custom build is usually close to the final construction cost and has nothing to do with market value or the land. Homes above one million dollars in rebuild value are generally best placed with a carrier built for high-value homes, where replacement cost, contents and valuables coverage are broader than on a standard form, as our article on HO-5 vs. HO-3 for a high-value Florida home explains.
Flood needs its own attention. For a new home in a high-risk flood zone, the building department will require an elevation certificate at completion, and submitting it can lower the flood premium. Construction lenders usually require flood coverage in place at closing if the home is in a special flood hazard area. Our article on elevation certificates covers how the certificate affects the rate.
When the Lender Is Involved
On a construction-to-permanent loan, the lender will require the homeowners policy to be in force at conversion and will want to be listed as mortgagee. Lenders do not wait for insurance, and a missing homeowners policy can delay the conversion or trigger force-placed coverage at a much higher cost. Coordinating the builders risk end date, the homeowners effective date and the loan conversion date is worth doing months ahead.
What to Confirm on a Custom Build
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Who is carrying builders risk, and is the owner named on it?
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Is the limit set to the full completed value, and has it been updated for change orders?
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What is the named storm deductible in dollars?
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What ends the builders risk, and when does the policy expire?
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Will anyone move in or store belongings before completion?
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Is the homeowners policy quoted and ready to bind before the builders risk ends?
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Has a wind mitigation inspection been scheduled for completion?
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Is flood coverage arranged, and is an elevation certificate available?
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Does the homeowners effective date line up with the loan conversion?
Custom Home Insurance in Florida
Prestige Insurance Group writes builders risk for new home construction in Florida, and we place high-value homes with carriers that specialize in them. That means we can insure the house while it goes up and have the homeowners and flood coverage ready before the builders risk ends, so the handoff happens in one office instead of between two. Start the conversation when the builder gives you a completion date, not when the certificate of occupancy arrives. Learn more on our builders risk insurance and homeowners insurance pages, or see what builders risk covers that general liability does not. Call the office nearest you. Se habla español.
Miami: 305-969-8776 Orlando: 407-993-2331
General information only, not legal advice. Builders risk termination provisions, course-of-construction options and homeowners eligibility vary by carrier. Refer to your actual policies and construction contract for the terms that apply to your home.
