Do you have clients who are about to embark on new construction projects? Or maybe you have other customers looking to renovate or expand their homes? As an insurance broker, you owe it to them to explain New York builder’s risk insurance benefits.
Builders’ risk insurance is a common requirement for new construction projects, whether for commercial or residential purposes. But they can be just as useful for home renovation, remodeling work, room additions, or incidents that result in damage to the home. This type of insurance provides coverage against the following:
- Fire
- Theft
- Vandalism
- Wind damage
- Negligence
Builders’ risk insurance versus homeowners insurance
Many property owners assume that homeowner insurance provides sufficient protection or will cover damage that may occur during renovation or remodeling. Some may even think that the general liability policy that contractors usually have offers adequate coverage.
But homeowners’ insurance is intended primarily for houses that have already been built instead of ongoing construction projects. In fact, most property insurance policies specifically exclude coverage for homes undergoing renovation when the loss occurred.
In contrast, builder’s risk insurance provides coverage for ongoing construction, as well as houses being renovated, remodeled, or added. As an insurance broker, it is your responsibility to explain the differences between property insurance and builders’ risk insurance to your clients.
Why builders’ risk insurance is essential for new construction and renovation
Why is builders’ risk insurance necessary for new construction projects and home renovation or remodeling? Unfinished structures are subject to risks that are typically non-issues for completed buildings. For instance, in a finished home, the foundation is protected from environmental factors by the rest of the building, which means that storm or rain damage is unlikely.
A newly laid foundation usually doesn’t have the same protection. When applying fresh concrete, a storm or thunderstorm can cause considerable damage to the work that has already been done.
Finished homes are generally safer from theft and fire as well because it is already occupied. In contrast, homes that are still being constructed or renovated often present an easy target for thieves who could easily walk away with construction materials, tools, and even heavy equipment. For these reasons, insurance brokers must communicate the necessity of builders’ risk insurance to their clients.
The value of builders’ risk coverage for ongoing remodeling or renovation work
Builders’ risk insurance is especially important when remodeling work or additions to the home are being made. Like standard structures, custom homes, tract or modular homes, and commercial structures represent significant monetary investments. Because these structures aren’t protected by typical property insurance when there is ongoing work, builders’ risk insurance is necessary for safeguarding the owners’ investment.
Who needs builders’ risk insurance?
Builders risk insurance provides coverage beyond standard policies for the following:
- Property owners
- Real estate developers
- General contractors
This type of insurance essentially covers those that have insurable interests in specific construction projects.
The coverage of builders’ risk insurance goes well beyond the protection provided by homeowners’ policies and general liability policies. This insurance covers materials and equipment, as well as fixtures that are to be installed permanently.
As an insurance agent, you need to understand how builders risk insurance protects new construction projects instead of existing structures. When recommending this type of insurance to your clients, you need to explain the scope of its coverage, which includes the following:
- Theft or damage to materials and fixtures
- Theft or damage to construction equipment
- Pollution cleaning and removal
- Workmanship defects
Builders’ risk insurance also protects against any liability in the event of injury to the contractor, the property owner, or a third-party individual.
Conclusion
As an insurance broker, you need to ensure that your clients have adequate protection against liabilities, loss of materials, and damage to their homes. Even if they already have property owners’ or home insurance, it is vital to communicate the necessity of getting builders risk insurance.
With builders’ risk coverage, your clients can rest easy knowing that they are protected against considerable financial loss if something untoward happens while renovating their home, adding a new room, or starting a construction project from scratch. With the coverage provided by builders’ risk insurance, they have a good chance of being reimbursed for structural damage or lost materials or equipment.
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.
