| NYC Business Group
How a Builder’s Risk Insurance Can Protect Your Business
Builder’s risk insurance policy covers a building where the insured area or building is still under construction. The insurance policy can cover the building/structure and the materials on-site waiting to be transported or installed. Learn more in this article on what this entails.
How a Builder’s Risk Insurance Can Protect Your Business.
Builder’s risk insurance policy covers a building where the insured area or building is still under construction. The insurance policy can cover the building/structure and the materials on-site waiting to be transported or installed. Typically, this is an insurance most owners as their contractor to carry. A builder’s risk insurance will cover damages up to the coverage limit. The coverage limit refers to the total cost of the completed structure, i.e., labor and material costs excluding land value. Most insurers rely on the construction budget to determine the insurance limit. Remember, the insurance can be written in terms of 3 months, 6 months, or 12 months depending on the agreed Terms and Conditions. In case the project isn’t completed within the policy term, a one-time extension period is given.
How Does a Builder’s Risk Insurance Work?
Commercial property insurance provides coverage for completed buildings and their contents, while a builder’s risk insurance provides coverage to buildings and structures while under construction. According to most insurance companies, a builder’s insurance policy should start before materials are transported to the construction site and end when the building is ready to be occupied or sold. Your building risk insurance coverage constitutes the total estimated value of the completed structure. If you want to know your coverage needs add labor costs, cost of the construction materials, and land value. Property damage can cause extra costs and delay your project. However, if you have a builder’s risk insurance, it can help pay repair costs and ensure the project is completed on time. Our agency can help guide you in this type of insurance, as well as other business owner's insurance needs.
What’s is Covered & Excluded in a Builder’s Risk Insurance?
Typically, the builder’s risk insurance coverage is determined by the construction project and insurance provider. Although most policies cover events beyond your control, some policies cover losses, construction defects, and damages (except those that are excluded from the policy).
The insurance risk covers loss or damage caused by:
- Theft
- Explosion
- Fire
- Vandalism
- Weather events
Some policies might cover the following:
- Damages to temporary structures, for example, scaffolding
- Debris removal, pollutants disposal, and cleaning
- Costs related to interest on loans, lost sales, rental income, and real estate taxes when construction is delayed
- Any construction changes to meet set environmental standards
Damages and losses excluded from builder’s risk insurance:
- Damages or losses resulting from faulty materials or work
- Damages from hurricanes, winds, earthquakes, or floods
- Terrorism acts
- Employee theft
- Typical rust, corrosion, or wear and tear
It is crucial to carefully assess your builder’s risk insurance policy terms and conditions, especially when buildings and structures are mentioned. Remember, a building is defined as a structure that will be occupied. Ergo, while all buildings can be structures, all structures are not buildings. Ask any questions you might have and clarify all the details to avoid inconveniences when filing a claim. Contact us today for a quote!
Is it Advisable to File a Claim With my General Liability Insurance & Builder’s Risk Insurance?
It depends on your coverage because the two insurance policies can cover damages caused by a subcontractor. However, if your builder’s insurance policy can cover the damages, go ahead and use it to keep your general liability insurance policy clean. If you have a clean liability history, your insurance premiums will be lower. Remember, general liability insurance will provide coverage if a client is injured, or third-party property is damaged at your construction site. The insurance policy will cover court costs, attorney fees, and any settlement fees.
Additional insurance policies are recommended to general contractors and construction businesses, these may include,
- Worker’s compensation insurance – the insurance policy is vital if an employee is injured at the job site. The policy covers the medical bills and lost wages.
- Auto insurance – if the construction project owns or entails vehicles, auto insurance is crucial to cover damages from accidents. However, if the employees use their own cars to work (besides commuting), non-owned and hired auto insurance is the best option.
- Contractor’s equipment insurance – this insurance policy covers large equipment such as bulldozers, building materials, diggers, tools, etc. If the equipment that’s less than five years old is damaged or stolen, you will get compensated.
- Professional liability insurance – if you are sued for oversight or construction mistake, the errors & omissions insurance/professional liability insurance provides coverage.
Since builder’s risk insurance can be complicated, ensure you research well and seek professional help from an insurance agent to make the right choice.
We can help you in making the right desicion for your business.