What Is A Builder’s Risk Insurance Policy?
Job owners generally survive by establishing good working relationships with contractors, but not necessarily trusting contractors to be safe on every job. Even the best contractors run into trouble, and that is why builder’s risk insurance exists. If you are a new contractor, then we suggest you sit down with one of our experts to go over your options in builder’s risk insurance because most job owners require it. If you are an experienced contractor, then we would be happy to sit down and help you go over your current builder’s risk insurance process and help you find ways to save money.
What Is Builder’s Risk Insurance?
In general, a builder’s risk insurance policy protects the named insured parties from very specific risks involved in a construction project. In most cases, the named insureds are the contractor, subcontractor, and job owner. The types of risks will vary depending on the project and the owner, but the more common risks include fire, theft, lightning, vandalism, and explosion.
Just like most other liability policies, builder’s risk policies have certain types of events that they will not cover. For example, most policies will not cover floods, contractor employee theft, storm damage, and government activities such as war. If a contractor or job owner feels that they need coverage for those types of events, there are other types of liability policies available.
Who Buys Builder’s Risk Insurance?
Builder’s risk insurance can be purchased by the project owner or the general contractor. The smart contractor will insist on purchasing the builder’s risk insurance so that they have complete control over the coverage that is offered. As long as the insurance meets the minimum requirements of the project owner, then the contractor can add any clauses they like to the policy. If the contractor feels that the project is in a bad neighborhood, then they may want to add protection for their equipment that exceeds the normal limits.
The job contract will outline exactly who has to purchase the builder’s risk insurance, and what coverage is required as a minimum amount. The insurance usually has to be in place after the contract is signed but prior to the start of work. A good risk management company can help a contractor get the precise coverage they need without spending more money on coverage that is unnecessary.
Quick Information On Builder’s Risk Insurance
Builder’s risk does not protect the contractor from liquidated damages due because the project has gone over schedule, and it does not apply to any change orders that have been denied or approved. It also does not cover any equipment malfunctions or repairs, and it does not offer financial protection to any of the insureds if the contractor or owner voluntarily stop the project.
When you take on a construction project, you are usually obliged to offer insurance protection to all parties involved. Builder’s risk insurance, whether it is mandatory or not, is still a good investment on the part of the general contractor. This type of insurance offers protection from a variety of events that most other construction liability policies do not offer.
Before you take on any builder’s risk insurance, be sure to talk to our trained experts on the best insurance options for your business. While having builder’s risk insurance is a good idea, that does not mean that you should pay more than required for your protection.