You know how important insuring your home is to you, your family and your heirs. There’s no need to validate the importance of protecting perhaps your single most important asset. But as a real estate investor and you’re building your next investment property, there are a few insurance policies youinsuring your construction project need to be aware of.

You want to cover the home once the building is complete and while your renters can purchase a renter’s policy, that type of insurance only covers your tenant’s personal property not the entire structure.

You’ll first need liability coverage while the home is being completed. Your liability policy protects your contractors and subs, builders and remodelers while the project is being rehabilitated or built from the ground up. Coverage compensates these individuals against injuries and personal property damage while on the work site.

A performance bond is also a form of insurance and it ensures the builder will complete the project as required and under the terms agreed upon. Builder’s risk insurance covers materials and labor cost lost due to a structural hazard during construction such as a fire or high winds. Such policy covers the materials and labor costs only as there should be no damage to the land underneath from natural disasters.

Another form of insurance is an agreement between your primary contractor and the subs involved in the project. This “hold harmless” agreement is drawn up by the subs that insures against work performed on behalf other builder.

Finally, your property may be in a flood zone. If it is, you’ll need flood insurance. Flood insurance is a separate policy than a homeowner’s policy. Before buying any lot on which to build, you’ll be in a position to order a flood certificate that will indicate whether or not any part of the lot lies in a flood zone. Flood insurance can be expensive, and will affect your decision to close on the transaction. 

To fully understand your liabilities, coverage and responsibilities, spend some time with your insurance agent so you’re both fully aware and fully protected as you complete each project.