The most important thing to know first about builders’ risk insurance is what it designed to do and pay for. Builders’ Risk insurance pays for the cost of repair, replacement, or recovery of the project value if there are damages to the structure or equipment in use.
Often called course of construction insurance, this is a policy the builder/contractor purchases during the construction process. In some cases, the builder might pass the responsibility of purchasing this coverage to the homeowner/client. It is designed to pay for the damage to the structure during the construction process and in most cases theft of building materials on site.
Most policies cover damages from fire, wind, theft, lightning, hail, explosion, and vandalism.
They also cover foundations, underground pipes, wiring, machinery, fixtures, structures, fencing, scaffolding, and construction signs. Though there are exclusions to what is covered, some insurance policies debris removal, modular components and defective workmanship.
The home must be insured for the finished value. Contractors should know this simple requirement if they purchase the builders’ risk coverage, so make sure the contractor’s policy has the right coverage amount for your finished home before the construction starts. Large contractors often carry this coverage on many construction projects, so they are able to negotiate with insurance agents for a better deal on their policy.
An important point to note here is that the coverage doesn’t include damages from faulty designs or flaws in workmanship. That falls under the area of professional liability.
The premiums for a builders risk policy depend on the policy limit, coverage provided as well as the policy term as builder’s risk policies could sometimes be purchased on a short term basis (3 or 6 months).
Before you purchase a builder’s risk policy, make sure you consult with an experienced agent to review not only the value of your finished home but also additional coverage options you might need due to the nature of the project and the risk.
Please contact us if you are considering building a new home or remodeling your current home and one of our experienced team members could help you answer your questions, address your concerns and provide you with comparative quotes with our carriers.