What is Builder's Risk Insurance?
Builder's Risk Insurance, also known as Course of Construction Insurance, is a form of property insurance that covers a building or structure under construction or renovation.
A Builder's Risk Insurance policy can be written to cover just the building or structure under construction or renovation, or the policy can be written to also cover the materials, fixtures, scaffolding and other equipment used for the project. The policy can be written to cover the materials on site waiting to be installed or even materials being transported to the job site or in temporary storage.
Who should buy Builder's Risk Insurance?
Custom home builders, general contractors and even property owners can purchase Builder's Risk Insurance to protect personal or business projects under construction.
Although Builder's Risk Insurance can be purchased by the builder or project contractor, it is often safer for the property owner to obtain the builder's risk policy since the property owner already owns the building, even while it is under construction. If damage to the building occurs, the property owner should be the beneficiary and control how the payment from a claim is spent.
Builder's Risk Insurance coverage may also be necessary to show proof of insurance to comply with local city, county and state building codes. Builder's Risk Insurance is also often required as a condition to many contracts between the builder or contractor and the property owner.
What perils are covered by Builder's Risk Insurance?
Buildings and structures under construction or renovation are particularly vulnerable to losses. The reason is primarily because uncompleted or unoccupied buildings are very inviting to intruders, arsons and thieves but also because open, uncompleted buildings are more vulnerable to forces of nature such as wind damage than enclosed completed structures.
Builder's Risk Insurance can cover a multitude of perils that can result in damage or loss to property under construction. The most common of these are damage or loss from fire, high winds, lightning, hail, theft and vandalism. Less common perils that are usually covered by Builder's Risk Insurance are explosions (a risk in buildings serviced by natural gas) and damage from vehicles or even aircraft.
The builder's risk insurance policy can also pay your expenses to remove debris from covered property if the debris results from a loss that is covered under the policy.
What perils are not covered by Builder's Risk Insurance?
Flood damage or wind damage in beach zones are not usually covered unless specifically included in the policy. (Water damage from the backup of sewers and drains is usually covered). A rider for flood damage should be considered for any Builder's Risk Insurance policies issued in the New Orleans area or just about anywhere in Louisiana!
Accidents and injuries at the workplace are not covered by Builder's Risk Insurance. Workers Compensation Insurance should be in place to cover all workers at the job site!
Other perils and situations not covered by Builder's Risk Insurance are: weather damage to property or materials left in the open, war, government action, contract penalty, voluntary parting, mechanical breakdown and damage resulting from faulty design, planning, workmanship or materials.
Damage from earthquakes are also not typically covered in Builder's Risk Insurance but are not usually a concern in the New Orleans area or in Louisiana.
How much Builder's Risk Insurance is needed?
A Builder's Risk Insurance policy will pay for damages to property, materials, fixtures and equipment included in the policy up to the covered limits. The covered limits for a building or structure must accurately reflect the total completed value of the structure including all materials and labor costs, but not including land value. The construction budget is the best source for determining the appropriate limit of insurance coverage.
How long is a Builder's Risk Insurance Policy in affect?
Builder's Risk insurance policies are usually written for three month, six month or twelve month periods. If the project is not completed by the end of the initial policy term, it can usually be extended, but usually only one time. Coverage should begin prior to when the first materials are delivered to the job site and typically ends at the closing of the sale, occupancy or the policy expiration date.
Once coverage under the builder's risk insurance ends, the property owner should have permanent property insurance in effect such as a homeowner's policy or a commercial property policy.
Be Sure Your Construction Project is Properly Covered!
Are you a property owner or contractor preparing to begin a new construction or renovation project in Metairie, Covington or somewhere in the New Orleans area? If so, contact a Commercial Insurance Specialist at Alliance Insurance Agency for a free consultation regarding your Builder's Risk Insurance coverage.
At Alliance Insurance Agency, we can provide coverage for construction projects of any type or size!