Insuring a new-construction home in Michigan is usually good news on price: new roofs, wiring, plumbing and heating mean fewer claims, and many carriers price new homes more favorably. Your homeowners policy needs to be in force no later than closing, insured to the cost to rebuild rather than the purchase price, with water backup added for the basement and the master deed checked if it's a site condo.
The short version: Bind your homeowners policy two to three weeks ahead, effective the day of closing, so your lender has proof in hand. Insure the house for what it would cost to rebuild, not what you paid for it and the lot. And know that homeowners insurance does not cover construction defects; that's what a builder's warranty is for.
When your coverage has to start
While the house is being built, the structure is typically covered by a builder's risk policy, if the builder carries one; who buys it depends on the contract. Builder's risk generally ends at or shortly after completion, sale or occupancy. Your homeowners policy should start no later than closing — and before you move anything into the house.
A homeowners policy isn't a substitute for builder's risk during construction. ISO's homeowners form HO 00 03 05 11, which many carriers build from, excludes "theft in or to a dwelling under construction, or of materials and supplies for use in the construction until the dwelling is finished and occupied." Carriers' forms vary. If you are building on your own lot, confirm in writing who carries builder's risk and when it ends.
Your lender will require proof of coverage before closing. Mortgage guidelines generally require replacement-cost coverage on the dwelling, so start your quote early: we recommend binding coverage two to three weeks before your closing date. Our home buyer's insurance checklist covers the closing steps.
Insure the rebuild, not the price
Homeowners insurance does not cover land. A builder's contract price includes the lot and lot premiums, and a one-off rebuild after a fire is priced differently than a subdivision build, so the rebuild cost can come in higher or lower than what you paid. Your dwelling limit should come from a replacement cost estimate built from the home's actual size, finishes and features. Every home we write is on a replacement cost basis.
What homeowners insurance won't cover on a new home
ISO's HO 00 03 05 11 excludes faulty, inadequate or defective workmanship, design and materials, and settling and resulting cracking of foundations, walls, floors and ceilings; most carriers' forms have similar exclusions. Those are often builder warranty items. What the policy generally does cover is a sudden covered loss that results from a defect — for example, a fire caused by a wiring mistake.
Michigan does not have a state new-home warranty program like some states do. Many builders offer their own written warranty, often structured as one year for workmanship, two for systems and ten for structure. For condominiums, including site condos, Michigan law requires the developer's disclosure statement to say that "express warranties are not provided unless specifically stated." Read your builder's warranty before closing and keep it with your policy.
Site condos: read the master deed
Many new Oakland County subdivisions are site condominiums. In many site condos, you own and insure the whole house on a homeowners form, while the association insures common areas. In attached condos, the association's master policy typically covers more and the owner needs a condo (HO-6) policy. But the master deed and bylaws decide who insures what, so send us the insurance section before we quote. Our Michigan condo insurance guide explains the HO-6 side.
The basement coverage most new homeowners skip
Standard homeowners policies do not cover water that backs up through drains or overflows from a sump pump. New basements and new sump pumps fail too, especially in spring storms with power outages. Water backup is an inexpensive endorsement: in our experience, about $80 a year for a $5,000 limit, and $300 or more for $50,000. If you plan to finish the basement, plan to raise the limit when you do. See does homeowners insurance cover water backup.
Frequently Asked Questions
Is homeowners insurance cheaper for a new house in Michigan?
Usually. New roofs, wiring, plumbing and heating mean fewer claims, so many carriers price new homes more favorably. How much less, and for how long, varies by company, which is why comparing several carriers matters.
When should homeowners insurance start on a new-construction home?
No later than closing, and before you move anything into the house. The builder's risk policy generally ends at or shortly after completion, sale or occupancy. Lenders require proof of coverage before closing, so bind your policy two to three weeks ahead, effective the day of closing.
Does homeowners insurance cover construction defects?
No. ISO's HO 00 03 05 11, which many carriers build from, excludes faulty workmanship, materials and design, and settling and cracking; most carriers' forms are similar. Those are often builder warranty issues. A sudden covered loss that results from a defect, such as a fire caused by a wiring error, is generally covered.
Does Michigan require builders to provide a new-home warranty?
Michigan does not have a state new-home warranty program. Many builders provide a written warranty voluntarily. For condominiums, the developer's disclosure statement must say that express warranties are not provided unless specifically stated.
Do site condo owners in Michigan need an HO-3 or HO-6 policy?
It depends on the master deed and bylaws. In many site condos the owner insures the entire house on a standard homeowners form and the association covers common areas, but the documents decide. Send your agent the insurance section of the bylaws before choosing a policy.
The bottom line
New homes often qualify for some of a carrier's best pricing. Make sure you're getting it, and make sure the policy is set up right before you get the keys.
J. Jacobs & Associates is an independent agency in Lake Orion that has insured Michigan homes for more than forty years. We represent more than ten preferred personal lines carriers, so we can compare your new home across companies that reward new construction — and quote your auto at the same time, since bundling can affect both. Send us your purchase agreement and closing date, or call (248) 693-6455. You can also start a homeowners quote online.