You should consider home insurance for your new home during construction. If
you don't, you may be exposing yourself to a great deal of risk if a fire, theft,
or other event damages or destroys your partially-completed home.
One way to cover your new home during construction is by purchasing a standard
homeowners insurance policy. This will cover you for any damage to the building
as it's being built, and may also provide some coverage for theft of building
supplies (although the contractor's insurance should also cover this). It also
provides liability coverage, which may come in handy if one of your friends
trips during a "tour" of your dream house and decides to sue you.
However, the policy will not cover your personal property until the building
is secure or "lockable." Once construction reaches this point, you
can add on homeowners insurance coverage for your personal property.
Another option is to purchase a "dwelling and fire" policy. This
type of policy covers damage to the physical structure, but provides no theft
coverage. A dwelling and fire policy may be an appropriate choice if you are
living in your old house during construction, because the homeowners policy
on that house would cover theft of items from the construction site. Dwelling
and fire policies also provide liability coverage, just like a standard homeowners
policy.
Once the building is complete, you should re-evaluate your coverage. If you
opted for dwelling and fire coverage, you may need to purchase a full homeowners
policy. If you bought standard homeowners insurance, make sure you have purchased
the right amount of insurance, especially if you have made alterations to the
original building plans (e.g., adding on a room or upgrading building supplies).
Please note that this description/explanation is intended only
as a guideline.