Construction zones can be dangerous, not only for people but also for the physical property itself. Whether you are crafting new construction or making some updates and renovations to an existing building, even the best contractors may sometimes make mistakes, and accidents can happen. In scenarios like these, having a robust builder’s risk insurance policy can protect you from being on the hook for the cost of repairs and replacements incurred during a construction project.
The right type of risk insurance for you will depend on your specific situation, but it is important to learn more about how this type of insurance policy can work for you before you make a decision.
What Does Builder’s Risk Insurance Do?
Builder’s risk insurance protects projects during the course of construction. Property damage can occur during construction, whether a building is being constructed from the ground up or something simpler, like an add-on or hallway.
If a fire destroys the construction progress or important materials are stolen, a client with a builder’s risk insurance policy can be protected from having to pay to remediate these issues.
Do I Need Builder’s Risk Insurance?
Builder’s risk insurance is valuable for anyone who is working with construction, but it is not limited only to the party who will own the construction once it is done. Builder’s risk insurance is also for contractors and their subcontractors and even lenders. Even if you are only tangentially related to a construction project, be sure to evaluate whether you could suffer negative financial consequences without risk insurance coverage.
Common Coverage Options For Builder’s Risk Insurance
At its most basic, a builder’s risk insurance policy will typically cover the materials and installation labor for permanent improvements to a project. However, more comprehensive policies will also include helpful provisions that safeguard your financial security in the event of unexpected events. If the construction is not completed on time due to direct physical damage, builder’s risk can help to cover the lost profit from a delay in opening, or additional soft costs such as interest expenses.
Depending on the exposures of a project, additional coverage extensions may also be purchased at various coverage amounts, such as demolition / increased cost of construction as it relates to an ordinance or law, debris removal, existing property (for renovation projects), materials in transit, and materials in storage.
Find The Right Risk Insurance Policy For You
Whether you are unsure if you need builder’s risk insurance or you would like to purchase a comprehensive policy that leaves you feeling secure and protected, trust the specialists. The professionals at Atlas Insurance Agency, A Marsh & McLennan Agency LLC can craft an insurance program that is suited for the specific type of project that you are working on. Reach out by calling (808) 400-6680 to learn more or request a quote online to get started on securing a policy.
Frequently Asked Questions About Builder’s Risk Insurance
Builder’s risk insurance covers buildings and structures during the course of construction, renovation, or installation. Standard policies protect the materials, fixtures, and equipment that will become part of the finished project against losses from fire, theft, vandalism, wind, lightning, and other covered perils. Many policies also cover materials in transit to the job site and materials stored off-site, as well as foundation work and temporary structures used during construction.
Either party can carry the policy, and the right answer depends on the construction contract. Property owners often carry builder’s risk on new construction projects they are financing. General contractors typically carry it on projects where they hold contractual responsibility for the work. Lenders may also require builder’s risk coverage as a condition of financing. The policy should name all parties with an insurable interest, including the owner, general contractor, subcontractors, and lender, so each party is protected if a loss occurs.
Builder’s risk policies are typically written for the duration of the construction project, usually three, six, or twelve months, with the option to extend if the project runs long. Coverage starts when construction begins and ends when the project is completed and the building is occupied or put into use. Once the project is finished, the property needs to transition to a permanent commercial property policy or homeowners policy, depending on how the building will be used.
It depends on the policy and the carrier. Standard builder’s risk policies often exclude or sublimit hurricane, flood, and earthquake damage, particularly in coastal or high-risk areas. Given Hawaiʻi’s exposure to all three perils, these coverages usually need to be specifically endorsed onto the policy or purchased as separate coverages. Atlas reviews each project’s location and risk profile to make sure these perils are addressed before construction begins.
Builder’s risk insurance covers physical damage to the construction project itself, including the building under construction and the materials going into it. General liability insurance covers third-party bodily injury and property damage claims that arise from contractor operations, such as a passerby getting injured at the job site or damage caused to a neighboring property. Both policies serve different purposes, and most construction projects require both, often along with workers compensation and commercial auto.
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