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Builders Risk Insurance

by Admin on October 27, 2011

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uilders risk insurance is a type of property insurance that insures against damage done to buildings during construction. This may also include vandalism, fire, lightning and wind. Both residential and commercial sites of construction may be covered under a builders risk insurance policy. This type of policy is for new construction, renovations and remodeling projects. During the process of a building’s construction, there are many threatening hazards that can compromise completion of the project as well as put the material used onsite or in transit at risk. So, this requires coverage to also cover any costs that may occur from unexpected loss. The building owner is the one who buys the risk insurance and may add the contractor as a name insured.

This builders risk insurance coverage not only makes a lot of sense financially, but there are many lenders who will not allow financing unless this coverage is provided. Builder’s risk insurance increases along with the progress of the project and terminates automatically after the completion.

Practical Tips For An Builders Risk Insurance

Because they involve both residential and commercial buildings, a builder’s risk insurance policy is important for most people. To lessen the difficulty of getting quotes and purchasing this insurance, there are several practical tips.

  • It is very important to find an agent or broker who works with this type of coverage. An insurance agent with this knowledge can provide all the needed recommendations and an agent that does not have this experience may not be familiar with everything included in this type of policy.
  • When setting up the policy, make sure the agent knows the current cost estimates of the project; this is a key determining factor of the premium and rate. The insurance agent will need to know information about the contractor of the job including how many years in business, any losses reported recently and if he has had any previous experience in this particular type of project.
  • Details about the project itself will include the type of construction, number of stories and the location. The beginning and ending dates of the projects and phases will need to be given. The insurance provider will want to know when they are considered at more risk. A higher risk phase would include blasting a foundation and a lower risk phase would be putting sheet rock on a wall.
  • To keep the insurance premiums at the lowest and qualify for credits, be sure to state all the safety features about the construction. Some of these may include a security patrol officer or fencing around the site.

It is advised to have an agent and attorney review contracts before signing; this helps to mitigate possible liability for something that is not covered under the policy.

Steps to Obtain Builders Risk Insurance

There are certain steps that need to be followed to obtain a builders risk insurance. One must begin with finding out with certainty that the policy does cover materials and supplies on the construction site, in storage and while being moved. Materials used on the site must be insured uninstalled and installed. It is important to find out if temporary foundations, structures and excavation sites are properly insured as well.

The next step would be to ensure all equipment, scaffolding and any leased or owned fencing that is in transit or on the site itself. If there happens to be a disaster, the owner could be responsible for lease payments on equipment that is destroyed. The policy should provide coverage if this were to happen. All weather related damage needs to be covered in the policy. This includes flood, sinkholes, fire, earthquakes and floods. Sewage and water damages need to also be addressed.

Costs related to faultiness, law changes and design error that interrupt work all need to be confirmed and covered by the policy. Coverage can also include ‘soft’ costs if the project is delayed significantly. Once the policy is written up, it is vital to study it to make sure all those who need to be insured are named; those include sub contractors, owners of equipment, owners of the building and mortgage companies when needed to be. Lastly, any policies that the owner of the property holds need to be reviewed to make sure they are compatible with this builder’s risk policy.

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