Custom Home Builder Insurance: What Actually Protects You?

Ask three questions: what general liability coverage the builder carries, who insures the structure while it is under construction, and whether his subcontractors carry their own coverage. Then ask about lien waivers, which are the protection most buyers never think to request and their bank will require anyway.

The short version

• "Licensed and insured" is a claim. Ask for a certificate of insurance.
• Washington’s minimum contractor bond is $12,000. Anasazi carries $30,000.
• Someone must insure the house while it is being built, before you own it.
• Subcontractor coverage is a separate question from the builder’s.
• Lien waivers stop a trade placing a lien on your finished home, and your bank requires them over $5,000.

What insurance should a custom home builder carry?

At minimum, general liability coverage and, where applicable, workers compensation. Both appear on the Washington Labor & Industries contractor record along with the bond, which is why running that lookup is the fastest first check. Anasazi is registered as a general contractor under CC01, license ANASABL825RL.

Ask for a certificate of insurance rather than accepting the phrase on a website. The certificate names the insurer, the coverage type and the policy period, and the insurer can confirm it is current.

Then ask when it expires. A policy that lapses three months into a ten month build is not coverage.

How to verify a custom home builder’s license and references

What is a contractor bond, and how much should it be?

Washington requires general contractors to carry a $12,000 license bond. That is a floor, and a builder can choose to carry more. Anasazi’s bond is $30,000, two and a half times the state minimum, held through The North River Insurance Company and increased effective January 2025.

The bond gives you limited recourse if a contractor fails to meet certain obligations, and the amounts involved are modest against the cost of a custom home. Treat it as a baseline rather than real protection.

What the number tells you is different from what it protects. A builder carrying only the minimum has met the requirement. A builder carrying more has chosen to.

Ask any builder what bond they hold. The figure appears on their L&I record, so the answer is checkable in seconds.

Who insures the house while it is being built?

Someone has to, and it is worth establishing who before construction starts. A partially built house is a real asset exposed to fire, weather, theft and vandalism, and the coverage that handles it during construction is not the homeowner policy you will carry afterward.

Ask your builder directly what is in place and ask your lender what they require, since a construction loan usually specifies the coverage as a condition of funding.

The answer differs by project and by lender, so get it in writing rather than assuming. This is a question to raise during the contract stage rather than after the framing goes up.

What about the subcontractors?

Their coverage is a separate matter from the builder’s, and on a custom home most of the physical work is done by trades rather than by the general contractor himself. Ask whether subcontractors are required to carry their own insurance and how that gets verified before they work on your site.

There is a related quality signal buried in this. Anasazi’s team of nearly twenty trades has worked together for about eight years, and John Worlund selects them partly on whether their own reputation matters to them.

"They keep the job site clean, they care about the homeowners, they care about the work they do," he says, "which reflects back into the lack of need for any callbacks."

A stable, properly covered trade base is both an insurance answer and a workmanship answer.

What are lien waivers and why do they protect you?

They prevent a subcontractor from placing a lien against your finished home over a payment dispute between him and your builder. Your bank will require them on anything over $5,000. Trades sign a partial waiver when they are paid during the build and a final waiver at completion.

This is the protection almost nobody asks about, and it is genuinely valuable. Without it, a homeowner who paid the builder in full can still face a claim from a trade the builder did not pay.

The draw structure supports the same protection. Anasazi’s out of pocket schedule ties payments to completed work, and on bank financed builds the lender sends an inspector to verify line items before releasing each draw.

Red flags to avoid when hiring a custom home builder

Insurance questions are uncomfortable to ask and cheap to resolve. If you want to work through them on a real project, the first conversation with Anasazi is free. You can also read about the company, how the build process runs, or what a fully custom home includes.

Related: How to hire a custom home builder · What should a custom home builder’s contract include?