Our nation is now undergoing a huge construction boom: everywhere you look, the pace is so hectic that experienced contractors cannot even keep up with demand! As you are passing one of these bustling sites and wondering about everything going on, there are a few important components behind the scenes to consider. Builder’s risk insurance provides coverage for structures that are in progress, as one could undergo severe loss if anything were to go wrong during the building.
What is Builder’s Risk Insurance?
Builder’s risk insurance provides secure coverage for construction materials and property during a project. You can obtain policies such as this for remodeling and installation as well as entirely new construction projects, and they are classified as either commercial or residential risks. Because each project has unique qualities, each builder’s risk policy is different. In many cases, builder’s risk insurance may be mandatory under county or specific city laws.
Who Needs Builder’s Risk Coverage?
Builder’s risk insurance is crucial for anyone with a vested interest in a property that is being built or renovated. When multiple parties embark on a construction project together, the responsibility of obtaining the policy usually falls on the general contractor. The building owner and subcontractors are then listed as additional insureds. In some instances, the owner of the building may be the one to purchase the policy. Here are some entities that can benefit from this type of coverage:
- Architects
- Builders
- Property Owners
- Investment Companies
- Engineers
- General Contractors
- Lenders
- Subcontractors
What Does Builder’s Risk Insurance Cover?
Builder’s risk insurance will protect workers and sites against loss and damage. Exact coverages and limitations vary between providers, and there may be several endorsements in question. Here are some of the instances you won’t have to worry about if covered:
- Fire
- Hail
- Lightning
- Theft
- Vandalism
- Hurricanes and other “acts of God”
- Explosions
Following are some of the physical elements covered by a Builder’s Risk Policy:
- Temporary storage buildings, scaffolding, and fence
- Supplies and materials in use
- Construction signs
- Plants & Trees
- Hard drives and/or project blueprints
- Increased costs of maintenance due to changes in law or building codes
- Completed labor
What is not Covered Under Builder’s Insurance?
For the elements you may encounter that are not covered under your builder’s insurance policy, there are additional forms of coverage that will offer you peace of mind. Here are a few of the things you may not be covered for initially:
- Terroristic acts
- Faulty design resulting in damage
- Theft from employees
- Mechanical breakdowns
- Corrosion and rust
- Depreciation considered wear and tear
How Much Does Builder’s Risk Insurance Cost?
Much like other types of coverage, your cost depends on the determined value of the project you are working on. One general rule of thumb is to expect around $100 a month for coverage, with policy limitations differing depending on who your provider is. Here are some of the other factors taken into consideration:
- Type of property
- Location
- Construction type
- Type of coverage selected
- Local taxes and fees
How to Find the Builder’s Risk Coverage That’s Right for You:
Finding the coverage that works for you will ensure that the project of your dreams won’t be lost due to any type of mishap. As some investors and builders graduate from working on multiple jobs at once, it can be easy to forego this necessity. Here are some of the best tactics to find the best risk insurance policy for your needs:
Figure out Your Desired Amount:
As you think about your project, it’s good practice to analyze where your severe risks are. Materials used, means of transportation, and the qualities of the site itself are all factors. Some builds may be in riskier categories, and this will greatly affect the amount you ultimately decide on.
When do You Need the Coverage to Begin?
Over the years, the best practice we have seen here at the Alexander Insurance Agency of St Charles is to begin coverage once the contracts are signed. Your policy will provide the vital details that allow you to know exactly when you are safely covered.
Estimate How Long Your Coverage Period Will be:
Builder’s risk insurance coverage typically will end when the last scrap is cleared off a lot and the project is officially done. Your policy should include very specific language stating when you are no longer covered. This could be when the policy expires, once the building is inhabited, or when the building is being used exactly as it was intended to be.
How does Builder’s Risk Insurance Differ from General Liability Insurance?
A general liability insurance policy offers coverage if you are responsible for sudden injury or property damage, along with paying for associated legal fees. General liability insurance for contractors protects against sudden explosions or fire. A general liability insurance policy for contractors also will typically cover:
- Anyone injured on your property
- Damage to a commercial space
- You or one of your employees causing property damage or injury
- Being sued for libel, slander, or false advertising
Being on a job site can be a very demanding time, and many different challenges must be overcome for 100% success. Talk to one of our agents today about a plan that works for you and allows for your development to successfully weather any circumstances that arise without warning!