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Sometimes called a builder’s risk policy, this policy protects you in case of theft, fire, weather, or other damage to the house while it’s being built. So, if, for example, your plumber drops their torch and burns down the framing, this policy pays for the cost of rebuilding the house to its previous condition before the damage. Lenders absolutely require this policy to be in place before they fund loans. The cost of this policy varies depending on your state and the size of your home. The following criteria need to be included in a course of construction policy:

 Coverage must be in an amount equal to the estimated replacement value of the improvements to be built or the loan amount, whichever is lower. Guaranteed replacement is usually acceptable instead of a specific dollar amount.

 The borrower is the named insured.

 The lender is named as the “mortgage and certificate holder.”

 There is a 438BFU Lender’s Loss Payable Endorsement naming the lender as the “loss payee.”

 The property address and/or legal description is listed on the insurance certificate.

 The maturity date on the insurance is at least one day beyond the end of the construction loan term.