Starting a construction project is an exciting yet risky venture because it comes with lots of financial implications. Whether you are looking to build a new residential house or a shopping complex for commercial activities, you must seek ways to protect your valuable investment. That is where builders risk insurance comes into the picture.
This blog highlights all the information that you need to know regarding this type of insurance so that you can make decisions based on your requirements.
Understanding Builders Risk Insurance
Builders risk insurance, also known as CAR (contractors all risk insurance) is a mutually signed agreement between property owners and the insurance company that protects their construction projects and stakeholders from financial losses due to damage or destruction of materials, fixtures, and equipment during the construction or renovation of a building.
It is a special type of property insurance that is designed to cover buildings and structures under construction. Unlike general liability insurance which only provides coverage against injury or accidents, builders risk policies offer coverage to the building itself as well as different materials and equipment used in the construction process.
Who Needs Builders Risk Insurance?
Here are the stakeholders involved in building risk insurance:
- Property owners
- General contractors
- Subcontractors
- Developers or builders
- Architects and engineers (when they have a financial stake)
In the majority of cases, the policyholder is either the property owner or general contractor, but it is common to have others involved as insured parties under the policy.
What Coverage Does Builders Risk Insurance Offer?
Builders risk coverage can be different on the basis of the insurer and policy but it generally covers:
- Buildings that are under construction.
- Materials and supplies on-site, in transit, or temporarily stored elsewhere.
- Scaffolding, temporary structures, and construction forms.
- Soft costs such as permit fees, architectural plans, and loan interest (when endorsed).
- Business income and extra expenses due to covered delays.
Be it damage by fire, theft, vandalism, or occurrences like wind and hail, builders risk coverage ensures that an unexpected financial loss does not result in a halt to your project.
What Does Builders Risk Insurance Not Cover?
Builders risk insurance has exclusions from coverage such as:
- Employee theft
- Wear and tear
- Acts of terrorism
- War
- Government action
- Contractual penalties or delays
For complete protection, many builders supplement general liability insurance, workers’ compensation, and equipment breakdown insurance in addition to their builders risk coverage.
How Long Does Builders Risk Insurance Last?
Usually, the term of builders risk policies is concurrent with the construction project. Most policies are customarily designed on a 3, 6, or 12-month basis, with the right of extension if the project takes longer than expected.
The coverage offered by builders risk insurance generally terminates once the project is completed or the property is occupied, whichever occurs first.
How Much Builders Risk Insurance Costs?
The cost of builders risk insurance depends on the following factors:
- Project value and location
- Duration of the construction
- Type of construction
- Coverage limits and deductibles
Most premiums are about 1 to 4 percent of the construction budget. It’s an extra expense, but fairly cheap as compared to potential loss due to unforeseen events, which can add up to hundreds of thousands of dollars.
Protect Your Dream Investment With Whitman Insurance Agency Today!
Having the appropriate builders risk insurance in place is an integral part of risk management, no matter the scale or complexity of your construction project. At Whitman Insurance Agency, we offer builders risk policies that are customizable as per the specific requirements of your project. When you hire our skilled insurance agents, they will see to it that you are completely protected from beginning to end, thereby ensuring financial security and peace of mind for you.
Call us today at (830-693-2900) or email us at whitman@whitmaninsurance.com and rest assured that your dream construction project will remain on track!
