There is a need to protect a property as soon construction has started on it, and doing so is just as essential as the security that will be in place when the project is completed. Your construction site is an initial investment, after all, but it is also a gold mine for thieves who know the value of your equipment and vandals who just enjoy destruction.
The good news is you can have a financial security net by taking out a builders risk insurance policy to protect your investment against such acts while your property is under construction. Such policies mean you have some assistance with replacements and repairs from a general contractor if damage is done to the structure or materials are stolen
What Is Builders Risk Insurance?
Builders risk insurance is an optional — but highly recommended — insurance policy offered by various insurance agencies. It is meant to cover damage to property and structures that are being built and lasts for the duration of the project. Like most insurance coverage, there are conditions and limitations to consider with your policy.
- Builders risk insurance covers materials, supplies, and equipment directly related to the overall construction of a property.
- Even items that are in transit to your property and will be used in its construction are covered if damaged on their way to the construction site.
- Property belonging to others is not covered with liability coverage.
- Builders risk insurance is open to all property owners, including homeowners.
- All types of construction can be covered, including new builds or remodels in current construction.
Construction projects vary, though, so it is important to know how your project will be covered should you choose to purchase builders risk insurance.
Which Damaging Conditions Are Covered?
Most of the conditions covered in your policy refer to damages to construction materials that happen accidentally or by others maliciously. These include, but are not limited to:
- Theft and/or vandalism
- Rain
- Wind
- Hail
- Fire and/or explosion
- Vehicle and/or aircraft accidents
You will want to review your policy to determine if some instances and situations are excluded. Other environmental coverages may have additional requirements or need to be supplemented with additional policies. Water damage must be supplemented with a flood insurance policy if you believe it is a possibility while your building is being constructed, for example.
What Is Excluded in Builders Risk Insurance?
Other instances are often excluded for coverage, including the following:
- Employee theft
- Earthquakes
- Water damage by weather
- Voluntarily parting with the contractor
- Faulty design
Employee theft leaves the liability with you as the business owner, as does deciding to part with a contractor and having damage done following the break in the contract. This can be a controversial exclusion for many who purchase this policy because there are times when contractors and property owners need to go their separate ways.
Extreme cases of weather — such as earthquakes, flooding, and hurricanes — require specialty insurance policies that are supplemented. They would not be eligible for liability coverage.
Limitations to Builders Risk Insurance
Like many insurance policies, there is a bit of flexibility when it comes to limitations and how much you can have covered with builders risk insurance. Before you apply, you must know how much you are planning to invest upfront in this construction project so you can break even if tragedy strikes.
There could also be additional costs that creep up during construction. You want to protect your investments by including a contingency amount with your limitations, as well as factor in how much it would cost you to restart the construction in the wake of destruction. It is an excellent practice to have your limitations higher than the value of your investment if possible so you can have as much financial assistance as needed.
Another limitation is that this policy is not something you carry from year to year with other commercial insurance policies. It is temporary and only lasts from the beginning of construction to its conclusion, when you have the option to select general commercial property insurance to protect your structure and the contents within.
Is Builder’s Risk Insurance Right for My Project?
Any property owner or person who has an interest in the property is eligible to purchase builders risk insurance. Homeowners and house flippers are able to purchase this policy for their new or remodeled residential construction. Below are factors to consider before you decide to purchase builders risk coverage during construction:
- Length of time for policy
- Ease of getting extensions when necessary
- Types of damages that are included/excluded
- Maximum coverage cost
This is an additional investment, making it essential to know up front if purchasing the policy will be worth the cost. If your project area is in a place where natural disasters are common, builders risk insurance may not be right for you. However, if your project is in a location with high theft — especially for valuable materials and equipment — you may want to consider it.
You should also consider if the liability insurance policy will cover total costs of materials and supplies should they be damaged or stolen. The right security system in place on your construction site means you can determine exactly who or what is responsible for missing items. A security system in conjunction with your builders risk policy can give you the proof you need for your claims and get financial assistance when needed.
Learn More About Builders Risk Policies
If you are not sure about securing builders risk insurance, you may need to reach out to security professionals who have experience securing these construction sites for risk management. If you would like more information about securing your construction site with builders risk insurance, the expert team at Mobile Video Guard is happy to answer any questions you may have. Contact us today to discuss your building security needs!
