To get the low-down on what builder’s risk insurance is and everything that makes it so important, we interviewed Jill Aldredge, the Sr. Marketing Consultant Construction Risk Services at SilverStone Group. And if you weren’t aware of just how important this insurance is already, you’ll definitely know after reading this.
What is builder’s risk insurance?
Builder’s risk insurance is property insurance meant to cover new construction (ground-up) or even renovation work on an existing structure (but not the existing structure itself). A builder’s risk policy provides coverage on any property that will become a permanent part of a structure, regardless of who owns that property prior to installation. It even provides coverage on those items that are included in the contract cost while they are in transit to a jobsite or stored at a location other than the construction site.
Who purchases the insurance?
Owners and contractors both purchase builder’s risk coverage but for residential construction, it is often easier for a contractor to purchase coverage through a reporting form type policy. The value of the project should be the construction cost, including labor and profit but excluding land.
What is or isn’t covered by builder’s risk insurance?
Standard builder’s risk policies do not include coverage for flood, earthquake, equipment breakdown or testing of HVAC or electrical systems but those coverages can normally be added for an increase in the builders risk rate. All claims for property damage on an insured site are meant to be covered by the builder’s risk, including theft of materials that will become a permanent part of the site, wind, hail, and fire. Items that will not become a permanent part of the structure such as contractor’s tools, etc., are still covered by the contractors own insurance policies (and not the builders risk), but some scaffolding or temporary structures can be covered by builder’s risk.
Why is builder’s risk so important?
A builder’s risk policy is meant to cover the interests of the owner, contractors and all subcontractors that are working on a project. It is important to have a builder’s risk policy on a project because it eliminates the question of who is at fault on the job site if someone’s actions cause property damage to the structure.
For new construction (ground-up), builder’s risk is the most comprehensive coverage available to protect all of the parties who have a financial interest in the project. For renovation work, the existing structure is normally covered by the owner’s property policy and often times, the renovation work can also be covered as part of the standard property policy. If the property policy is not able to accommodate the renovation work in their policy form, a builder’s risk or installation floater can cover the renovation work until it is accepted by the owner.