I had to have builders risk insurance before the construction loan closing could take place. Then after your home is built you can transfer builders risk policy into a homeowners policy.

Builder's risk insurance insures the house-in-progress against wind and fire, and some other possibilities depending on the policy language. Lenders require these policies to protect their investment in the property. Contact an insurance agent to get a policy, it's pretty similar to any other insurance product.

While you're talking to an agent, it is important to have a liability policy that covers the house (if some kid walks onto your half-built house and injures himself, you could face liability for his injuries). Builder's risk policies usually do not cover this kind of risk. However, your current homeowner's insurance policy probably does, but you should check. And if you don't currently own a home, then you probably need to obtain additional insurance.