What Is Builder's Risk Insurance?
Builders Risk insurance is coverage that protects a person or company from loss during construction or renovation of a building.
It’s also known as inland marine coverage or course of construction insurance interchangeably.
What Does Builder's Risk Cover?
Builders risk covers the insurable interest in materials, fixtures and equipment before, during or after installation during a construction or renovation project.
When Is Builders Risk Insurance Needed?
Anytime there is a project being done you need to consider builders risk insurance. It can be paid by the property owner or the General contractor as a way to insure materials and equipment.
Why should you get builders risk insurance? Simply put, theft from construction sites are a major problem that you will need to protect yourself from.
According to the Annual Theft Report from 2015 from the National Equipment Register (NER) the cost of equipment theft annually ranges between $300 million to $1 billion dollars.
Unless you are OK with contributing to that already humongous number you must have builders risk insurance every time you do any construction or renovation work on your property.
Builders Risk Insurance vs. General Liability
A common mistake that contractors make when they are deciding on an insurance policy is that they think that their general liability coverage is enough.
While general liability insurance coverage is definitely needed, that doesn’t exclude the need for a builders risk policy.
The Major difference between builders risk insurance and general liability is that general liability insurance protects against loss due to injuries and property damage that you or your subcontractors are responsible for.
General liability insurance doesn’t cover materials and equipment that you own or use for a project.
In most cases, you will need to have both types of coverage to best protect yourself from loss in most areas.
Another popular question, especially among subcontractors is “What about an installation floater?” To answer this we need to quickly cover what an installation floater is.
What Is An Installation Floater?
An installation floater is a policy that covers property that is installed by a contractor.
While technically an installation floater functions similarly to builders risk it may not be beneficial in many cases.
When a property owner or general contractor has builders risk and the subcontractor has an installation floater, it can muddy the waters when it comes to who the insurance companies should reimburse.
In simple terms, you may not get compensated for losses and if you do, it may take much longer to get it.
What About A Performance Bond?
A performance bond protects the owners interest should the contractor fail to complete the agreed upon work. While this could help protect from loss to the owner, it doesn’t specifically cover stolen equipment for contractors.
When Does Builder's Risk Coverage Start?
For many people, the policy period may be a little confusing when they get a builders risk policy. Does it start the day you get the policy, does it start when the work begins, etc.
The best way to make sure that you know when you are actually covered is to thoroughly read your policy to find the inception date.
For some builders risk policies it could be the date the contracts were signed, or a date specified by the lenders but no matter when the inception date is the general rule of thumb is that the coverage is enforce throughout the duration of the contract period.
When Does Builder's Risk Insurance End?
There are 5 situations that end your coverage. They are:
What Does Builder's Risk Insurance Cost?
Typically speaking, you can expect to pay between one and four percent of the project cost as a premium.
These costs can vary drastically based on a few key factors such as the location, the type of construction and the type of project to name a few.
The higher the risk exposure inherent in a project the higher the premium is likely to be.
For example, a $100,000 property renovation in a flood zone using low quality materials is much more likely to pay a higher premium than the new construction of a home using steel framing that is in a 500 year flood plain.
Be sure to plan accordingly and you should be able to find a great premium for your builders risk insurance coverage.
Where To Get Builders Risk Insurance
Getting the right builders risk coverage for your needs is going to be key to keeping your costs manageable while also protecting yourself from the widest range of risk.
The best way to make sure that you get what you need is to find a reputable and knowledgeable insurance broker or agent to work with.
You also need someone who has multiple insurance carriers to choose from so that you get the best rates available.
Finally, you want to choose someone who knows how to help the contractors in the construction industry.
We’ve been in business for almost 30 years, we have over 50 insurance to choose from and the majority of our business policy owners are contractors.