Breaking Down the Builder’s Risk Policy

With construction such a staple in the American economy, insurance for construction projects is a necessity.  There are two main forms of construction insurance coverage, and while they are often confused with one another, they cover very different areas of risk. Construction general liability insurance is an important policy to cover bodily injury or property damage to a third party, it does not cover the structure and its materials. This is where Builder’s Risk comes in.

Builder’s risk insurance is in fact a type of property insurance. It covers the building where the insured area is currently being constructed. Not only does it cover the structure, but it also covers the materials waiting to be moved or installed. For most contractors, this is the type of insurance that you’re going to want to carry. Here’s a bit more information on this coverage:

What it Covers

A builder’s risk policy covers a wide range of damages done to an insured structure. Damage from the following is covered in most, if not all, policies:

  • Fire
  • Wind
  • Theft
  • Lightning
  • Hail
  • Explosion
  • Vandalism
  • Vehicles/Aircraft

Read an insurance policy inside and out to better understand any limitations or exclusions that there may be. Limited coverage is provided for other situations. Some standard exclusions include:

  • Earthquake
  • Employee theft
  • Water damage
  • War
  • Government action
  • Weather damage to property out in the open
  • Contract penalty
  • Voluntary parting
  • Mechanical breakdown

These type of issues are often dealt with via a general or professional liability policy rather than a builder’s risk policy. Earthquake and flood coverage can be purchased separately in some areas.

What it Costs

A policy will cost anywhere from one to four percent of the construction cost, depending on the type of policy and exclusions there are. A good insurance company will help you assess the problems quickly and solve them as soon as possible. Some companies cover the soft costs of the projects, but it’s important to ask about it, because it could raise your builder’s insurance costs. Make sure to speak to your agent if you have any questions about your coverage; they’d be happy to help you out!

Is an Extension Needed?

Sometimes an extension of coverage is needed. Unfortunately, these types of coverages can also be limited. Common builder’s risk insurance extensions include:

  • An extension that covers your property while being transported to the job site.
  • An extension that applies to scaffolding, construction forms and temporary structures (while they are at the location reported).
  • An extension that covers installed property at a secured location pertaining to the insured company.
  • When the fire department is called to save or protect covered property from a covered cause of loss.
  • Removing debris from a covered property, as long as the loss is covered under the policy.
  • Water damage from back-up sewage and drains.
  • Valuable papers such as site plans and blueprints.

Considering everything that a builder’s risk policy covers, it’s important that any construction business has this type of coverage. Contact your construction insurance agent today to learn more about how you can bring this policy to your business.

About ISU / The Olson Duncan Agency

At ISU-The Olson Duncan Agency, our goal is to provide clients with a total solution, not just a quote or a contract. We provide businesses and individuals with insurance and risk management solutions, and we aim to provide real value and build trustworthy, long-term relationships with our clients. To learn more about our services, give us a call today at (310) 373-6441 to speak with one of our professionals.

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