If you are a commercial property owner or builder, you can face a huge loss if something goes wrong with the building’s construction. This is where builder’s risk insurance comes into the picture.
Builder’s risk insurance offers property coverage for structures and buildings that are under construction. It also covers the materials that are used during the project.
Also referred to as course of construction insurance, this policy helps to protect new construction models as well as installation projects and remodels.
It offers optional endorsements and standard coverages to cover commercial or residential courses of construction projects. Builder’s risk insurance is often mandated by the government. It is also a condition to meet with many contractual arrangements.
Who Needs Builder’s Risk Insurance Coverage
Just so you know, anyone with a financial hand in construction projects, whether residential or commercial, should get this policy. Below are some of the people that may benefit from the insurance:
- Engineers
- General Contractors
- Builders
- House Flippers
- Subcontractors
- Engineers
- Investment and Development Companies
- Lenders
- Architects
What Does a Builder’s Risk Insurance Policy Cover?
Just like I have stated above, this policy protects properties that are under construction, building materials, and structures against certain losses. Here are some of the policy-covered perils:
- Fire
- Lightning
- Vandalism
- Explosions
- Windstorm
- Theft
- Collapse
- Hail
- Hurricanes and other natural disasters
Just so you know, every builder’s risk insurance is different, and they cover a certain set of losses. Depending on the insurer and policy you go for, this insurance may also cover
- Labor
- Trees, plants, and construction signs
- Equipment like repairing damaged equipment as long as this equipment is covered by the policy
- Structures and buildings under construction and fencing, temporary storage buildings, and scaffolding
- Supplies and materials that are used
- Important papers, such as electronic data and blueprints
- Law and ordinance costs, or the cost to rebuild or repair because of building codes and laws at the period of loss.
Most of these insurance policies help cover expenses that you may face due to construction delays. These expenses include lost rental income, real estate taxes, and loan interest.
What is Not Included?
Keep in mind, not everything is covered under this policy. For instance, floods and earthquakes are not typically covered. But you can purchase additional insurance for these scenarios. Below are other exclusions.
- War and other acts of terrorism
- Wear and tear
- Corrosion and rust
- Damages because of faulty designs
- Employee theft
- Mechanical Breakdowns
Ensure that you checked the policy’s exclusions before purchasing it. You need to be aware of what you are paying for if something worse happens.
How Much Does It Cost?
According to Insureon, policyholders pay an average of $105 a month for this policy. However, you should know that the cost of this policy depends on the total value of the building or structure.
Some relevant factors that may determine the cost of this policy include the number of employees, materials, labor, the insurance company, coverage options, deductible, and coverage limits.
Policy limitations and coverage will vary among insurers. So be sure to shop around for price and coverage that matches what you need.
When Should I Purchase Builder’s Insurance?
Just so you know, builder’s risk insurance is a temporary policy. The coverage begins the day the contract is signed or the construction’s first official day. The policy’s expiration date could be the day the project is completed. Or the date that the building becomes occupied.
If you want to purchase this policy, ensure that you purchase it before the building project starts. Most insurers don’t sell this policy for projects that are already going on.
Purchasing this policy at the right time will protect you against financial loss from unforeseen incidents that can damage properties.
How to Find the Best Builder’s Risk Insurance Policy
Shopping for this policy is very similar to purchasing other policies. You will need to decide on the coverage you need. Think about the project and the risk that comes with it.
This should include materials, transportation, storage, and the construction site. Just like I have mentioned above, you will need the coverage as soon as the contract is signed.
Ensure that you compare rates from various insurance companies. Many insurance companies offer this builder’s risk insurance.
You can visit their websites and compare quotes and rates. Before purchasing the policy, ensure you understand it well to avoid surprises.
Other insurance policies to consider are contracting and construction: general liability insurance, surety bonds, worker’s compensation policy, business owner’s policy, and professional liability insurance.
With these policies, your mind will be at rest even if there is an expected financial loss.