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| Which loan is right for me? |
Years
in
the house |
Recommended
Program |
| 1 - 3 |
3/1 ARM, 1year ARM or
6 month ARM |
| 3 - 5 |
5/1 ARM |
| 5 - 7 |
7/1 ARM |
| 7 - 10 |
10/1 ARM, 30 year fixed or
15 year fixed |
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definitive E-book for obtaining the best
construction loan!
Table of Contents
What type of construction loan insurance is required and who is required to get it?
There are three types of insurance needed to build. All banks require the first two insurances, course of construction and general liability. Workman's compensation is only required if your builder has employees.
- Course of Construction Insurance. This policy is an all risk policy to include, fire, extended coverage, builder's risk, replacement cost, vandalism and malicious mischief insurance coverage.
- General Liability Insurance. You or your builder can provide this policy. This policy is a comprehensive general policy or a broad form liability endorsement. The minimum amount of $300,000 for each occurrence is required. If the builder provides the insurance a general policy of $1,000,000 or a broad form liability endorsement is required.
- Workman's Compensation Insurance. If your builder owns his own company and has employees that are helping to build your home, workman's compensation is required.
If the builder simply subcontracts out the work and does not have employees per se, they will need to write a letter acknowledging that they do not have employees and are not required to have WCI.
If your builder tells you he is not required to provide any insurance whatsoever he is most likely correct because it is not a law to have insurance to build a house.
This requirement is set forth by the bank. So make sure you hire a reputable builder with insurance, it will help your construction loan close much faster.
Ask your builder upfront if they have general liability insurance. If they do not ask if they have a problem providing the insurance. Some builder's cannot afford or simply do not want to pay for the insurance and then guess who has to provide it, yes, you do. You can save yourself a lot of headaches and money if you work with a builder that has insurance.
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