19 Jul Understanding Builder’s Risk Insurance: Coverage Essentials for Construction Projects
Whether your company builds new houses or renovates existing ones, you need to have a builder’s risk insurance policy in place. This insurance covers a number of important things that you might otherwise have to pay for out of pocket. Without a builder’s risk policy in place, one simple mistake could result in you paying thousands of dollars, putting your business and livelihood at risk of going under.
What does builder’s risk insurance cover? What do you need to know about this essential insurance policy? We’ll clear up many of these mysteries below.
Who is Builder’s Risk Insurance Designed to Cover?
Not every business can obtain a builder’s risk insurance policy. In fact, the general contractor is usually the one who takes out the policy. Once they set the paperwork in motion for the insurance, various people end up getting covered by it, including the home or property owners, the developer or investor if there is one, the architects who designed the structure, any contractors or subcontractors working on the home, and even the lenders who financed the structure or renovation. All these people are stakeholders in the project, so it makes sense that they’d have coverage under the policy.
Does Builder’s Risk Insurance Cover Everything That Could Potentially Go Wrong?
The short answer here is “no.” There are plenty of things that this type of policy won’t cover, such as workers’ compensation claims and workplace accidents. The former is covered by a workers’ compensation insurance policy and the latter by a construction liability one. However, builder’s risk insurance does cover the following things:
- Equipment issues that result in equipment needing to be repaired or replaced.
- Damages, such as those caused by inclement weather, as well as vandalism.
- Issues with the building materials, like defective boards or sheets of drywall, as well as theft of those materials.
- Financial losses. For example, if the developer loses money due to construction delays for any reason.
How Much Does Builder’s Risk Insurance Typically Cost?
Although the overall price of the policy can vary, depending on a number of factors, like location and extra coverage options that get added on, for the most part, you can expect to pay around 5% of the overall budget for the construction. This means that if you’re building a house and the project is priced at $1 million, the insurance will be 5% of that, or $50,000. It seems like a large amount, but when you look at what’s included, the price is worth the peace of mind.
How Do You Purchase a Builder’s Risk Insurance Policy?
If you need a builder’s risk insurance policy, reach out to your insurance agent. The company that serves all of your other business insurance needs will be able to help you out. Keep in mind that you’ll need some information, such as the scope of the project and names of the contracting and subcontracting businesses, so be prepared with as much information as possible.
Ready to purchase a builder’s risk insurance policy for a current or future project? Our knowledgeable team at Spivey Insurance can help review your current coverage or help you set up a new policy. Contact us today.