What is Builder’s Risk Insurance?
Builders’ risk insurance, also referred to as course of construction insurance, is a type of property insurance. Its specific purpose is to protect buildings while they are under construction.
Contractor builders’ risk coverage is complex because there are no standard policy forms since every construction project is different. As a result, many contractors misunderstand this coverage.
Contractors are responsible for ensuring projects reach completion. To reach this goal, you must have coverage for buildings that are still under construction, new structures, or the renovation of existing ones. Also, the coverage typically continues until the building project is complete and the owner signs off.
In this article, we will go over some of the most usual questions about builders’ risk insurance and what this coverage does not include.
What does Builder’s Risk Insurance Cover?
Builders’ risk insurance covers many different elements of unfinished structures. One of the most common uses of these policies is for protection against property damage. According to the Hartford Insurance Company, contractors with this coverage also have protection from:
- Fires & explosions
- Natural disasters
- Theft
- Vandalism
Another benefit of builders’ risk insurance is its coverage of materials used on construction projects. Materials, equipment, and building supplies are all covered for the same damage as the building itself.
Does Builders’ Risk Insurance Only Cover Construction Losses?
No! Your builders’ risk insurance policy also provides coverage for losses resulting from delays caused by property damage. Some examples of this coverage include loss of sales or income from rentals, extra interest on loans, and taxes.
As we mentioned, each construction project is unique, so builders’ risk insurance is easily customizable according to specific needs. For example, if your project requires scaffolding, you can add coverage for this to your builders’ risk insurance. Some other common additions to this coverage are temporary structures, debris removal in the case of a loss, and pollutant cleanup.
What is Not Included in My Builders’ Risk Policy?
There are some exclusions that you need to look out for with builders’ risk insurance. Some of the most common exclusions are earthquakes, floods, and high winds. Although most policies exclude these risks, sometimes you can add an extension to your policy to get these covered.
Other exclusions to builders’ risk insurance are:
- Terrorism & war acts
- Normal wear and tear
- Employee theft
- Workmanship problems
- Issues in planning
- Design flaws
- Rust and corrosion
- Mechanical failure
Also, note that builders’ risk differs between new construction and renovation. Builders’ risk insurance covers new buildings from the groundbreaking to the completion of a project. For a renovation project, it only covers the building during the restoration period.
What To Do Before Purchasing Coverage
Before you buy your builders’ risk insurance policy, make sure you have gone over all the exclusions and what your policy includes. There is no fixed price for these policies, so it is important to make sure you tailor your policy to your specific needs.
You also need to make sure you ask yourself the question, “Does my builders’ risk insurance start right away?” You need to know when your policy goes into effect and when it ends. It is important to make sure these dates align with your project, so coverage is available for its entire duration.
The most important advice we can give to you is to look at your other policies and find where you need more coverage. Since this coverage is easily customizable, you can use it to fill in the gaps that your other policies do not cover.
How to Make Sure Your Coverage is in Place
This can be a challenging task, but with the right tool, it is simple! Using risk management software like SmartCompliance allows contractors to upload certificates of insurance (COIs) and track coverage to see where compliance is met and where there are gaps. Doing this will help you decide how to create your builders’ risk policy.
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