It is extremely important to have builders risk insurance for any construction project, but it is complicated and often confusing. This type of insurance does not have any standardized policy forms and coverage can vary widely between insurers and projects. This article will discuss builders risk coverage and important things to consider before deciding on a policy.
Builders Risk Insurance
Builders risk coverage is a unique type of insurance created for structures under construction. It is also referred to as course of construction insurance. The coverage for this insurance starts on the date stated in the policy and ends when the job has been finished and ready for use.
Because each construction project is unique, the policies to cover them will be unique as well. In general, the majority of builders risk policies include coverage for the following: fire, vandalism, lightning, theft, hail, hurricanes, explosions and numerous other risks. Typically, losses that result from wind, earthquakes, and floods in beach zones are not covered. Depending on the insurer, you may have the option to purchase policy extensions to cover buildings that are susceptible to these risks. Other typical exclusions include the following: mechanical breakdowns, normal wear and tear, rust and corrosion, acts of war and terror, employee theft, and damage due to faulty design, workmanship, planning, and materials.
What Types of Properties are Covered?
Typically, a general builders risk policy covers buildings during the construction phase. This also includes coverage of materials, equipment, and supplies that are in transit, temporarily located, or onsite. The policy may also cover costs due to losses that push back the project’s completion date. Things such as lost sales, real estate taxes, rental income, additional interest, and many other expenses can rise rapidly when a project is delayed. Builders risk coverage is designed to help reduce or eradicate the financial effects of these costs.
Additional coverages could be included in your regular policy or purchased separately. Typically, extensions are purchased for pollutant cleanup, scaffolding, debris removal due to losses, construction forms, and temporary structures. Certain insurers may also offer coverage for upgrading a site to comply with eco-friendly standards.
Who Needs This Coverage?
Any individual or business with a monetary interest in a building project needs builders risk insurance. Stakeholders usually include the general contractor, subcontractors, and the property owner who have a stake in the project until it is completed. If your project will be financed, the financial institution may demand coverage. The policy may also include architects and engineers. A builders risk policy usually includes a waiver of subrogation. This clause declares that everyone listed on the contract concurs to relinquish their rights of subrogation within the provisions of the policy.