How Much Does Construction Insurance Really Cost?

Construction insurance is rarely the first thing that comes to mind when people are planning a new home. Designs, timelines, and budgets receive the primary consideration. Insurance appears in the conversation afterward, normally when a lender asks for proof of coverage or a contractor points out a requirement in the contract. At that moment, the cost might be perceived to be vague or even surprisingly high.

Construction insurance cost is not arbitrary. It conforms to the same patterns that are associated with the project’s value, location, and risk exposure. Learning about the pricing methods helps to set a budget more easily and avoids the policy gap during the construction stage. The article talks about the cost of construction insurance, describing in detail the reasons for these costs and illustrating how the insurers usually deal with the homeowners and constructors at various stages of a residential construction project.

What Construction Insurance Covers During a Home Build?

Home construction insurance is not a single policy. It refers to a group of coverages designed to protect a property while it is being built. When homeowners ask how much does construction insurance costs, the answer often depends on which of these coverages are required and who is responsible for carrying them.

The most common form is builders risk insurance, sometimes called course of construction insurance. Builders risk insurance covers the structure under construction, materials stored on site or in transit, and certain temporary structures used during the build.

Liability coverage during construction is separate. It protects from a third party’s claim for injury or damage to adjacent property as a result of construction work. Typically, the contractor secures liability insurance, and if necessary, the homeowners are included in the policy as additional insureds.

What is the Average Construction Insurance Cost?

Published industry data shows relatively consistent pricing ranges for construction insurance.

Small construction companies generally incur a cost of around $80 monthly for general liability insurance, which translates to approximately $960 yearly. According to the Forbes Advisor, the yearly payment for the liability coverage varies between $700 and $2,000, depending on the size and risk of the projects.

Builders risk insurance has variable pricing. Independent industry sources are in agreement that premiums are connected with total project value instead of monthly rates. Based on guidance from the underwriting insights published by US Assure, builders risk insurance is typically priced in proportion to the total completed value of the project, with costs increasing as construction value, duration, and exposure rise.

Homeowners who take on the role of owner-builders may find that the cost of liability insurance is adjusted to reflect the higher risk associated with these homeowners.

Note: The numbers given are for planning purposes, not for firm commitments. Pricing ultimately is determined by the underwriting evaluation and the particular regional circumstances.

How Builders Risk Insurance Is Priced

Builders risk insurance is tied directly to the value of the completed home. A higher replacement value leads to a higher premium, even if the project footprint is modest.

Most policies are written for a defined term, commonly six or twelve months. If construction extends beyond that window, coverage must be extended at an additional cost. The coverage typically begins when materials arrive on site and ends when the home is complete or occupied.

Weather exposure, theft risk, and construction methods also affect pricing. Projects in storm-prone regions or dense urban areas tend to see higher premiums.

Liability Insurance Costs During Construction

Liability insurance protects against claims involving bodily injury or property damage caused during construction. For residential projects, this coverage is usually carried by the general contractor.

If a homeowner serves as their own general contractor, their liability risk rises, and a separate liability policy is often necessary during the construction period.

Who Is Responsible for Construction Insurance?

Construction insurance responsibility will rely on the project setup and the construction contract provisions. In the case of residential construction, the home builders risk insurance can either be taken out by the owner of the house, the builder, or the financial institution that lent money. Typically, the party responsible will be named in the construction contract.

Most lenders for construction projects will not fund the project unless there is insurance for the builder’s risk. The unfinished house is insured, which also protects the lender’s interest during the home’s construction process. Liability insurance is generally the contractor’s duty, and it protects against accidents or damage to the property caused by the construction process. However, it is recommended that homeowners check with the insurance company about the coverage limits and that all involved parties are correctly listed before the work commences.

Construction Insurance Cost in Texas and Houston

Location is critical when it comes to measurable construction insurance costs. The building codes, labor conditions, and weather exposure are the main factors that have an impact on the construction cost in Texas. However, Houston introduces other factors such as wind and hail risk.

Insurance firms incorporate these risks into their pricing decisions, especially for builders risk insurance. The insurance expense may be higher for houses located in storm-prone or coastal areas during the construction time.

Another way that Texas legislation affects insurance is by mandating minimum coverage and setting rules for the insurance companies. It is necessary to have an excellent adviser who knows the local situation well in order to avoid delays and unexpected costs.

Transitioning to Homeowners Insurance After Construction

The builders risk insurance policy is terminated when the construction work has been completed or when the dwelling is occupied. Then, the insurance for the newly constructed house is initiated.

Buildings in the process of construction are not covered under normal homeowners insurance. The transition of risk from builders to permanent homeowners insurance, if well planned, will ensure maximum protection during inspections, obtaining final approvals, and moving in. This transition is often overlooked, making it one of the most common causes of coverage gaps during a project.

Factors That Increase Construction Insurance Cost

Several factors consistently increase construction insurance costs:

• Longer build timelines increase exposure.
• Custom materials raise replacement values.
• Owner-managed projects increase liability risk.
• High-risk trades add underwriting scrutiny.
• Projects with unclear contracts or incomplete documentation often face higher premiums or limited coverage options.

Planning early and providing accurate project details helps keep costs predictable.

How TWFG Khan Insurance Services Supports Home Builders

Construction insurance is not merely an obligation to be fulfilled before the start of the project. It is a realistic protection that secures the investment while the house is still unprotected. The appropriate protection prevents the losses that were not expected from being turned into costly delays or personal financial burdens. From materials that are stored on the construction site to liabilities arising during the process of daily working, the right coverage supports the whole project instead of complicating it.

For homeowners and builders in Texas, especially in fast‑growing areas like Houston and Central Texas, understanding construction business insurance costs early allows for better planning and fewer surprises. Builders risk coverage, liability protection, and the transition to homeowners insurance all need to work together. When they do, insurance becomes part of a smooth building process instead of an afterthought.

In case you are thinking about a new building or your building is in the process of construction, it is time to check your insurance coverage. TWFG Khan Insurance Services collaborates with homeowners and contractors to provide a construction insurance policy that not only meets the requirements of the lender but also reflects the risk factors in Texas and covers the actual project size.

To review coverage options, request a quote, or confirm your policy, contact TWFG Khan Insurance for expert guidance throughout your construction project. Just a brief chat today could assist in avoiding expensive gaps and ensuring that your construction is on schedule.

Frequently Asked Questions

Q1. How Much Does Construction Insurance Cost for a New Home? 

The expense of builders risk insurance generally falls between 1 and 4 percent of the overall construction value. The liability premiums depend on the project’s nature and the coverage owner.

Q2. Does Homeowners Insurance Cover a Home Under Construction?

No. Home insurance usually starts only after the building has been completed and the property is occupied.

Q3. Is Construction Insurance Required? 

Prior to the disbursement of the construction loan, most financiers necessitate builders risk insurance.

Q4. Can Homeowners Purchase Builders Risk Insurance Directly?

Yes. It is a common practice among homeowners to directly get builders risk insurance, especially when they take up the role of the general contractor.

Q5. What Happens If There Is a Gap in Coverage During Construction?

A gap in coverage can leave homeowners financially responsible for damage, theft, or accidents. Properly structured construction insurance, including builders risk and liability coverage, helps prevent these gaps and ensures continuous protection throughout the build.