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Builder’s Risk Insurance

Builder’s risk insurance, although complex and highly misunderstood, is essential in safeguarding construction projects. This type of insurance can cover only the structure under construction or the on-site construction materials and those in transit.

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A well-structured construction insurance course is the backbone of an effective risk management program during a construction project. This type of insurance helps protect construction projects from property damage that may result from:

  • Hail
  • Vandalism
  • Lighting
  • Theft
  • Fire
  • Explosions
  • Natural disasters like hurricanes
  • Strong winds

Exclusions of the Builder’s Risk Insurance Policy

Ensure you carefully read through your insurance policy to understand its exclusions and limitations. Some coverage excludes floods, earthquakes, beaches, and wind damages from their coverage. However, you can get an extension if your construction project is vulnerable to these kinds of risks. Typical exclusions of builder’s risk insurance may include:

  • Mechanical breakdowns
  • Wear and tear
  • Corrosion and rust
  • Damages caused by faulty designs
  • Voluntary parting
  • Government action
  • War
  • Contract penalty
  • Water damage
  • Employee theft

An essential exclusion that should be read and understood in its entirety may include coverage for damages, which result from poor planning, faulty workmanship, and materials. However, these issues may be addressed by professional liability coverage and not the builder’s risk insurance policy. In some areas, you may purchase floods and earthquake coverage separately.

Who will require builder’s risk insurance?

Any company or individual with financial interests in a construction project will require a builder’s risk insurance coverage. You may also want to include the following people in your policy:

  1. Property owner
  2. Lenders
  3. Subcontractors
  4. General contractors
  5. Architects

What is the cost of builder’s risk insurance?

Each builder’s risk insurance coverage is different, and costs will differ depending on your needs. Your policy may require more content, or your construction project may require additional protection, thus adding more extensions to the cover. A builder’s risk insurance policy cost will depend on the type of construction project, the variety of construction materials used, and other policy details such as coverage limits and amounts.

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The best way to protect your project is to choose a policy with limits that match your total anticipated construction costs. Therefore, a construction project with a higher value will result in a higher insurance rate. The best way to determine the exact price you will pay for your builder’s risk insurance is by contacting an insurance broker or agent to get you a quote depending on your type of project.

Think Through All Your Project’s Exposure Before Getting a Policy

Consider and inventory all your construction project’s vulnerabilities and exposures at all phases of the project. Include exposures at the construction site, temporary storage or sites, and those in transit. Doing an inventory will help you choose the right policy. You may decide to get an all-inclusive policy that covers properties of all kinds at every location, or you could choose a narrow policy that will cover only specific risks and properties. Whichever policy you choose, ensure that you carefully review it to confirm there are no coverage gaps.

Know When Your Coverage Begins and Ends

A builder’s risk coverage starts on the date when all the contracts have been completed and signed. However, specific policy requirements can restrict when the coverage begins for your construction project. Read the agreement carefully to understand what triggers the start of your coverage.

Knowing when your coverage ends is also essential. Since this type of coverage is temporary, it is likely to end after completing your project. Read your policy to understand when the coverage ends. Some builder’s insurance policies end after a policy is canceled or expires, the building gets occupants, or the building gets put to its intended use.

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Read Your Insurance Policy

Before signing a contract, ensure that you go through the entire policy— double-check all insurance coverage conditions, what it covers, and its exclusions. You must know what is covered and what is not in your builder’s insurance coverage. If you notice a coverage gap, you can work closely with your insurance broker or agent to address it.

How to Select the Best Builder’s Risk Insurance Carrier

Today, most insurers write construction insurance policies in an inland marine rather than a standard property insurance form, allows for a wide-range coverage that’s custom-made to fit the needs of any construction project. For this reason, it is essential to choose an experienced marine insurance carrier. You will reap numerous benefits from working with an underwriter who focuses on builder’s risk insurance and can tailor-make and design an insurance policy that will cover your needs.

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