While undertaking a construction project, no matter how big or small, it’s wise to get protection against loss and liability. Most projects carry a degree of uncertainty and an unexpected disaster, delay or claim against you can spell disaster to your business.
Building contractors invest considerable capital, time, expertise and effort in a project and it’s essential that you take the best possible insurance coverage to protect this investment against loss or damage.
What Is a Builder’s Risk Policy?
It is also known as course of construction insurance and provides insurance coverage for risks to the contractor’s property, materials and equipment that are directly related to the construction project. This is applicable to new builds, renovation, remodeling, addition, and restoration of existing structures.
Typically, coverage extends for as long as the project is under way and it lapses when the project is complete, the policy date expires or it is signed off and occupied.
Is It Necessary?
Construction projects are highly capital intensive. Many contractors feel that it is an unnecessary expense and an overly complicated process. However, it can form a great support system for your project and protect it and your construction business against a variety of disasters and liabilities such as vandalism, and contractual penalties.
There may be several exclusions based on the risk assessment and coverage provided by your contract.
You can also purchase add on coverage for extra items such as debris removal, damage to neighbor’s property, delay or stoppage of work due to strikes, terrorism, civil commotion, extended earth works and so on. Other aspects such as poor design, faulty or low-quality materials, shoddy workmanship, and material damage can be covered by additional purchase.
What Does It Pay For?
When you purchase a policy, it’s important to read the contract carefully and understand exactly what it covers. There may be exclusions that you may not have paid attention to clearly while designing the contract. For instance, most builder’s risk policies don’t cover subcontractors because they must have their own coverage.
5 Things to Consider before Purchasing a Builder’s Risk Policy
1. Analyze your Project: The rates differ for different construction projects. For instance, a new build project may have different premium rates as compared to a renovation or remodeling project. You will need to get coverage to protect the portion of the building that’s not being worked on to ensure that the correct coverage is in force.
2. Analyze your Risk: While it’s impossible to cover every eventuality, make sure that your policy correctly addresses the known risks. However, you can avoid unnecessary coverage such as earthquake or flood coverage if your project is in a geographic location not prone to such events
3. Installation floater: Materials that are not being presently used but need to be present on the job site must be covered against damage and loss. You can add an installation floater clause in your policy to provide risk protection for these materials and equipment.
4. Stay in touch with your risk advisor: Make sure that your risk advisor stays abreast of the development, delays, extensions, and requirement for additional labor or materials in your project. This helps to give you the right coverage and make changes in your policy at the right time.
5. Customize your coverage: Partner with an insurance company or agent who has the experience and knowledge of projects like yours. This allows you to get the most affordable, correct and tailor-made coverage based on the unique nature and extent of your project.
Ready to get a Builder’s Risk Policy?
Purchasing a Builder's Risk policy is the right step in ensuring your business is well-protected. Consider your needs and budget before finalizing your decision. Consider speaking to a professional and experienced agent for guidance and assistance.