A builder’s risk insurance policy is excellent for construction companies, contractors, or subcontractors. Some might wonder, is the general liability insurance not enough? To some extent, yes. Still, builder’s risk insurance is something your client needs to consider.
What do your clients need to know about builder’s risk insurance? Here are some essentials.
How Does It Work?
Builder’s risk insurance is a policy for work in progress in a construction project. It protects structures and building projects.
Unlike general liability or commercial property insurance, builder’s risk is a temporary policy. It starts when the construction begins and ends when the building is finished.
However, the best policy covers the client before their construction materials arrive. The transport of these materials from the supplier to the construction site is still part of the construction.
So, how much coverage is appropriate for each project? The answer depends on labor costs, land value, and construction materials. Add these costs up, and the sum is the amount of coverage your client can pay for the insurance.
One example was if you had a $3 million home with $200k in assets inside the house, with their program, you would only pay a premium on the $200k. Their builders’ risk program has no labor law exclusion. Commercial property covers the homeowner more comprehensively, rather than just premises liability, a unique value proposition.
Insurance Coverage and Exclusions
Builders Risk Insurance New York varies from one provider to another, from one project to another. Many policies protect your client from unforeseen events and uncontrollable circumstances.
Some insurance policies cover losses, defects, or damages related to construction, generally. However, some exclusions are explicitly mentioned in the policy statement.
Coverage
The insurance protects policyholders from theft, explosion, vandalism, fire, and weather catastrophes such as floods and hurricanes. Other coverage may include:
- Lost sales or income.
- Real estate taxes for delayed construction.
- Costs in changing construction sites and making them compliant with environmental standards.
Exclusions
Some builders’ risk policies don’t include employee theft, terrorism acts, weather events near beach zones, or places prone to floods, earthquakes, and hurricanes. Normal wear and tear aren’t also insurable. Liability arising from faulty work isn’t part of this policy and has a different insurance coverage set.
Builder’s Risk Coverage Vs. General Liability Insurance
What are the differences and similarities between these two insurance policies?
The builder’s risk policy covers the construction site and materials. It can also cover damages on the property during construction. General liability, on the other hand, covers your client even after the construction period. It’s ongoing and needs renewal annually.
In cases when the two policies overlap, your client is better off claiming the builder’s risk than general liability. Remember, general liability is an ongoing cost, and a claim this year will increase the premium next year.
General liability covers attorney fees and other court costs. Project clients might require this additional coverage because construction is a risky business, as your client wouldn’t want to suffer heavy losses because the insurance coverage isn’t sufficient.
Additional Insurance Policies to Consider
Aside from general liability and builder’s risk, here are three more policies your client should add to their current coverage.
Equipment insurance
Every contractor has equipment and tools. This insurance will cover your client’s equipment, from bulldozers to diggers, from tools to building materials. If these are stolen, damaged, in-transit, and less than five years old, you can claim reimbursement.
Workers’ compensation
This insurance covers reimbursement claims for any employee-related injuries. One requirement is that injuries should be sustained during construction hours. This policy is a requirement for all contractors with employees.
Professional Liability
Errors are inevitable even if your client has a thorough plan and strict procedures during the construction period. The truth is people might still sue your client even on slight issues found in a newly constructed building. This insurance can protect your client from expensive litigation costs.
Auto Insurance
This insurance covers vehicles owned by your client in doing their construction business. If the employees use their vehicle for work, the best coverage is hired and non-owned auto insurance.
Builder’s risk insurance is one part of a more comprehensive and collective policy. It’s sometimes complicated for contractors to understand. However, it’s a necessary investment for construction projects since these projects are risky by nature.
About Snyder Specialty
Snyder Specialty, LLC is a New York-based underwriting facility that provides a range of property and liability solutions for personal and commercial lines. Specializing in coastal properties and hard-to-place risks, Snyder Specialty expands your current capabilities with proven solutions for complex risks. Find out more about the company’s range of services by calling (718) 362-8039.
