What is Construction and Contracting insurance? And why do you need to care?
The contractors, property owners, or home builders who all are involved in upgrades, expansions, and renovation projects have invested significant resources in materials that need to be protected from the physical loss and damage. To protect these resources from physical loss or damage we have Builder’s risk insurance, which is tailored and customized to meet the required sources and scope of the project. As the project on the site advances to further stages the material shifts demanding extra protection and therefore the Builder’s risk insurance is made flexible to meet the changing needs.
Commercial Coverage Plus in Holbrook, New York is all about that. We bring along builders, developers, contractors, and all others involved in the construction industry together and work closely to understand and reduce the risk of financial loss with a Builder’s risk insurance policy customized to fit the perfect needs of the clients.
Risks never come with a warning sign and construction sites are exposed to higher capital or situational as well as climatic risk, including heavy weather, lightning, fire, theft, vandals, and several other hazards. Such risks can completely hinder the financial condition of any project, and that is why protecting the capital in doing business is the right way.
What is a Builder’s risk insurance? Do you need it?
Majority of you are familiar with property insurance that is a legal protection of your home or apartment as you move in. But have you ever thought of who is protecting the house that is being built for someone to live in? Who is held accountable in case of any mishap, say, theft, damage due to the bad weather condition or any other related issue? How does the portion of land that is under construction get covered under construction insurance if the worst case scenario might occur?
It is also known as the course of construction insurance.It is a specific form of inland marine insurance that includes construction-related risks. In addition to the risk associated with already-made or-built properties, properties that are undergoing renovations or are still in the planning stages may also be at risk.
This is the reason that there are specialized types of contracting insurance made for the property owners to help them protect their properties throughout the construction or renovation phase. Although there are many options available to cover potential risks and financial loss, the most common options include stand alone builders risk policy or an endorsement to a personal lines policy.
A lot of times people consider a standard commercial property insurance to cover all the damages. A builder’s risk policy is your sole option because a commercial property insurance policy does not cover the risk unique to construction or renovation projects.
What are the cost requirements for a Builder’s risk insurance?
A builder’s risk insurance coverage may cost more or less based on a number of factors. We have mentioned a few of them below so that you may get a broad idea of them.
- The type of construction project
- Duration of the project
- Estimated cost of the project
- Safety measures and monitoring on the site
- Experience and history of the builder and the contractor
- Material required for the construction project
Such combinations of requirements with adding special circumstantial factors will be deciding the total cost of the builder’s risk insurance. There is another way that many builders like to calculate builder’s risk plan cost and that is by adding up the construction budget and costing it approximately from 1% to 4% of the total project cost.
The deciding elements:
- Duration of the project
- Another construction or renovation project
- Insured location of the construction project
- Price of the construction material which may vary as per the type of the construction project
- Number of workers or employees involves at the construction site
Builder’s risk insurance policy
Generally the contract of the builder’s risk policy must cover the following items:
⦁ All the permanent or temporary buildings in your construction site.
Even after taking all the necessary precautions, your construction site might encounter adverse climatic conditions, accidents from visitors or vandalism acts from strangers. A builder’s risk policy should cover all such potential damages and must compensate without the need to pay for a deductible amount.
⦁ Material and infrastructure equipment required for the construction project.
There is a lot of material and equipment such as plumbing or electrical networks that can attract a number of bandits or thieves. Since the construction sites are extremely vulnerable without the protection of alarms or even doors such situations are hard to prevent from happening. In case your construction site encounters such a situation your builder’s risk policy can make up for you for such financial or capital loss.
⦁ Accidents related to material transportation from one location to another.
When you are working on a construction site or even renovating a house, transportation of material from one side to another takes place. These situations are prone to accidents involving heavy bulky vehicles including cranes, trucks or even cars. These accidents can happen in the construction project area and that is why builders’ risk policy is useful to compensate for such tragic accidents. You can further secure the vehicles under the commercial auto insurance policies.
⦁ Removal of catastrophic and excavation incidents.
When you are working on a concrete building there may be some excavation required to remove the existing structure from the site. The debris that can settle due to the adverse climatic conditions such as a hurricane, wildfire, or a cyclone to your construction site can harm your property in a severe manner for which a builder’s risk insurance coverage is essential that covers the payments of such unexpected events.
⦁ Income or rental value loss
Any obstacle or delay in the building’s construction will cause you to experience extreme financial difficulty if you are working on a building or construction project that will generate rental or company income. Such delays can occur due to a number of problems. And that is where builder’s risk insurance works wonders by paying all the income loss that you have encountered due to the delay which otherwise could have led you to a fatal economic situation.
Some additional coverages of the Builder’s Risk Policy
There are some additional coverages to the central policy that can be added by the protuners of the contractors to have fully secured policy for their construction site.
1) Sewer overflow damages
This benefit will cover the accidents occurring due to the water inflow from the sewers at the construction site.
2) Fire department charge
Construction sites are not subjected to the city taxes or property taxes and that is why this coverage can reimburse the fire department in case of any emergency or mishap.
3) Cleaning and removal of the pollutants
Any pollutant agent that might hinder the health safety of the site and the people involved gets covered under this option.
4) The loss of the valuable paperwork and documents.
In case any important paperwork or document goes missing you are liable to get compensated for such a loss in the form of economic aid to reissue the document.
5) Earthquake aid
Natural calamities come without warning and there are improbable chances that your construction site or premise will suffer from an earthquake during the construction or renovation project. If such a situation happens then under the earthquake aid you can pay a 2% deductible total project cost to reimburse for the loss you have suffered due to the earthquake.
6) Suppliers and subcontractors interest
During the ongoing construction project the transportation of equipment and supplies occurs and many subcontractors or suppliers may put their equipment or capital material to your construction site for a certain time period. If you suffer any loss or damage to those equipment or materials this option serves you with the compensation to cover up for the loss or damage of the items.
7) Time delays
The economic adversity you can encounter due to the time delays include rental or business loss of income. All such losses are covered under the builder’s risk policy to provide you the required aid.
What do you must know before buying a builder’s risk policy!
The builders risk policy for every builder is unique and written according to the construction site and work required for the project. Here are some of the general things that an contracting insurance broker must let you know.
Regardless of the fact that you have a property owner or a constructor a separate liability coverage for workers is a must to compensate for the accidents or property damage occurring at the site. This coverage can also provide it for lost wages and other medical expenses that you may require at any moment. This will also cover the damage occurred to the hot movies or other neighboring properties by your construction site.
Malfunctioning of equipment:
In case of a mishap or adverse event, damage to the expensive equipment can take a toll on your budget. Builder’s risk policy must be well documented to cover all the security of the expensive high-tech equipment and the insurance company must be held accountable to pay the invoices concerning its purchase and installation.
Financial coverage for existing structures:
Several construction projects are all about renovating, re-modelling, and structuring existing buildings, adding additional touches, roofs or architectures to the same structure. There might occur a situation where your existing building suffers damage due to remodeling or restructuring. To cover those damages for the existing structures this option must be covered in the contract.
Insured interest of every stakeholder must be mentioned in the contract:
Usually the majority of builder’s risk policy consists of the property owner, constructor, and the bank as the stakeholders for the property that have insurance claim rights in case of any adverse event. However you must ask your broker or a contracting insurance partner for the appearance of the subcontractors and material suppliers on the contract of the builder’s risk policy for the sake of lawful grounds for compensation.
Do you need a builder’s risk policy if your contractor has insurance?
If you are a property owner having a renovation or construction project going on at your premises it is your duty to ensure that everyone who is working or involved at the construction site is insured.
The contractors carry liability coverage and worker compensation. However, it is a good practice to ask if the subcontractors and the self-employed individuals are covered by their insurance policy. You can seek a certificate of insurance to be clear on the same.
Other than that even if your contractor has insurance you can ask your insurance agent about the risk involvements and whether you need a builder’s risk policy or not for the project. Many municipal authorities have proposed the compulsion of builder’s risk policy or insurance for construction projects and therefore you must check on with your local building inspector’s office to enquire about the requirements beforehand.
Commercial Coverage Plus
When it comes to future investments nothing is more important when protecting your valuable capital assets in a construction project and that is where our reliable team at Commercial Coverage Plus can be your professional partners. External risks pose a higher level of risk to the construction sites than a finished home. Especially the workplaces where dangerous tools, high-tech machineries, and other equipment are involved that are exposed to the hazards.
With the help of our custom made builder’s risk insurance policies you can manage various material fixtures, equipment used on the site, and other specific needs for the project in an efficient manner. Our team of well-qualified minds will help you find the policy that matches your perfect needs and cover all the items that are insurable.
We are the contracting and construction specialist who will help you navigate the insurance market and will make sure that all your requirements and needs are covered under a robust policy. Give us a call to discuss the builder’s risk insurance you need for the protection of your capital asset.