People working in the construction industry will be well aware of the different risks involved in building, renovating or remodelling a structure. For example, lightning could strike newly installed electrical utilities or wind could blow away materials to be used. Building contractors and property owners need to be protected against these different possibilities of property damage or loss. One method is to use builders risk insurance.

Builders risk insurance is created specifically for buildings that are under construction. Unfortunately, the policy will vary according to the insurance company and the construction contract between the contractor and the property owner. To ensure you find the best type of builders risk insurance, it is important that you take the following considerations into account.

Who Should Purchase The Insurance Policy?

Typically, builders risk insurance is purchased by the property owner; however, it is possible for the building contractor to purchase the policy as part of the construction contract. For example, if a person purchases a home with the intention of renovation, he or she is responsible for insurance interests. If the contractor developing the property pays for materials, labour costs, permits and any other construction expenses, then the contractor would be liable for insurance interests. It is important to note that the building codes can change according to the county and proof of insurance may be required before any projects begin.

How Should Insurance Companies Be Selected?

It is important that you hire the most suitable insurance company when purchasing a builders risk insurance policy. Companies may offer discounted rates for individuals who already have homeowner’s, automobile or renter’s insurance policies with the company. If, however, you are purchasing a policy without being an existing client it is recommended that you shop around and compare prices beforehand. It is advised that you question the company’s coverage and procedures for filing claims. In some cases, companies will allow policyholders to convert the policy to a homeowner’s insurance policy at the end of the construction – this can be a beneficial aspect to hiring an insurance company.

How Much Should Be Purchased?

It is important to remember that damages to a property will only be paid up to the set coverage limit by the insurance company. For example, if the project experiences complete damage to a structure caused by a fire, the owner would benefit most from a policy that provides full coverage. This will include all materials and labour, but not the land value.

To purchase the correct amount of coverage, it is recommended that you use a construction budget. An accurate estimate from the contractor can also contribute to how long the policy should be used and how much should be obtained.

What Aspects Are Covered?

Builders risk policies can vary based on the project, but a general policy will cover fire damage, wind damage, lightning and hail damage, theft and vandalism. Time lost for labour can also be covered in the policy.

What Is Not Covered?

All builders risk insurance policies will be deemed invalid when damages occur as a result of faulty workmanship, poor materials or faulty design. Earthquake and flood damage can be added to policies but they are typically not covered.


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