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Your Construction Project with Builder's Risk Insurance: A Must-Have for Home Builders
As a home builder, you invest significant time, effort, and resources into your construction projects. However, unforeseen events beyond your control, such as fire, theft, or natural disasters, can put your hard work and financial stability at risk. To safeguard your project and mitigate potential losses, it is essential to understand the importance of Builder's Risk Insurance. This comprehensive article will delve into the intricacies of Builder's Risk Insurance, discuss who needs it, and spotlight its benefits for home builders.
What is Builder's Risk Insurance? Builder's Risk Insurance, also known as Course of Construction Insurance, is a specialized insurance policy designed to protect the interests of home builders during the construction phase. It provides coverage for damage or loss to the insured property, including the building and materials, against a wide range of perils, excluding certain specified exclusions.
Who needs Builder's Risk Insurance? While Builder's Risk Insurance is not legally mandated, it is highly recommended and often required by lenders, contractors, and project owners. Home builders undertaking construction projects of various sizes, such as residential developments, remodeling projects, or custom-built homes, can greatly benefit from this coverage. Additionally, it is crucial for builders involved in commercial construction projects, including retail spaces, office buildings, and multi-unit residential complexes.
The Importance of Builder's Risk Insurance for Home Builders:
Protection against property damage: Builder's Risk Insurance covers property damage resulting from perils like fire, windstorms, vandalism, theft, and more. This coverage ensures that your investment is protected, as repairing or replacing damaged property can be a significant financial burden without insurance.
Coverage for construction materials: Builder's Risk Insurance extends coverage to construction materials stored on-site or in transit. This protects against theft, damage from inclement weather, accidents during transportation, or vandalism. This coverage is particularly beneficial in high-risk areas or when expensive materials are used.
Profit preservation: In the event of a covered loss, Builder's Risk Insurance helps home builders preserve their expected profits. It covers additional expenses, such as temporary structures, debris removal, and professional fees required to complete the project on time or repair the damaged property. This enables builders to fulfill their contractual obligations without incurring significant financial setbacks.
Enhanced reputation and client confidence: By having Builder's Risk Insurance, home builders demonstrate their commitment to protecting their clients' investments and showcasing a professional approach to risk management. This instills confidence in clients, lenders, and stakeholders, leading to enhanced reputation and increased business opportunities.
Conclusion: Builder's Risk Insurance is an indispensable tool for home builders undertaking construction projects of any scale. Its all-encompassing coverage protects against various perils, safeguards your investment, and ensures the smooth completion of your projects. By securing Builder's Risk Insurance, home builders can focus on their core competencies, minimize potential losses, and build a solid foundation for long-term success.
Remember, while this article provides valuable insights, it is essential to consult with one of our insurance professionals to determine the specific policy details that suit your needs.
While many may recognize the need for builders risk insurance, just as many are vague on details like what builders risk covers or who’s eligible for it. With 40 years of insurance experience, we get those questions all the time. Today, we’d like to provide the answers to some of those commonly asked questions.
What is builders risk insurance?
Builders risk insurance (also known as course of construction or inland marine coverage) is defined as insurance that protects a person's or organization's insurable interest in materials, fixtures and/or equipment awaiting installation (or after installation) during the construction or renovation of a building or structure, should those items sustain physical loss or damage from a covered loss.
However, the differences in covered exposures and policy types between providers (and even between those types of policies offered by a single provider) can make it difficult to determine precisely what you and your clients can expect from a builder's risk insurance.
Who buys builders risk insurance?
There are several groups of eligible clients for a commercial or residential builders risk policy – all of which can purchase the policy in their name, including the following:
Builders risk policies (and the projects they cover) are typically available for ground-up new construction, remodeling (including or excluding the existing structure) and installation.
These projects are classified as either a residential or commercial risk. Bear in mind that the definition of those categories changes from provider to provider. The Builders Risk Plan insured recognizes a residential project as structures from 1-to-4 family home (whether the work performed involves ground-up construction, renovation or installation). Commercial projects are far more varied, covering anything from office buildings to wind turbines to multimillion-dollar sports arenas.
And on that note, limits as to risk value vary by company. The Builders Risk plan insured by Zurich offers coverage for course of construction projects valued up to $75 million, for example.
What types of policies are available?
Builders risk policies are typically available for three varieties of construction: ground-up new construction, remodeling (including or excluding the existing structure) and installation. From there, builders risk policies types often vary between providers. Despite differences in terminology, most builders risk insurance is available in a few different varieties. Those policy types typically include the location-specific/single-project, reporting form, blanket policy and the blanket installation policy. The location-specific policy is very straightforward, while reporting form and blanket policies can be more complex, enabling clients to include multiple projects under the same policy.
What exposures does builders risk cover?
Builders risk is designed to protect construction sites from loss and damage. While exact coverages and limitations vary between providers, comprehensive builders risk policies may offer coverage for theft and vandalism, as well as additional coverages including (but not limited to) soft costs, flood, windstorm, earthquake, ordinance and law, and business income and extra expense. Policies may also cover damage to construction material, temporary structures, fencing, scaffolding, subdivision signs and landscaping.
Builders risk policies alone, however, do not typically cover liability (for accidents and injuries in the workplace). Stand-alone liability insurance may be secured in addition to course of construction coverage.