Builders risk insurance is essential coverage for contractors and owners when building a new structure. This insurance allows you to protect your structure during construction. This type of insurance offers benefits not available with commercial property or homeowners insurance. These are the main benefits of this coverage.
How it works
This type of insurance is usually purchased by the property owner. The policy may be purchased by the general contractor responsible for the construction of large projects. The written agreement between the owner and general contractor will cover who buys the policy. It is clear that the owner of the property and the general contractor in the job are responsible for providing the insurance coverage.
This type of insurance protects the structure being constructed before it becomes a finished building. After the project is completed, traditional homeowners and commercial property insurance can cover it. A regular insurance policy won’t provide coverage until then.
Many things could go wrong during the building construction phase, which could result in the destruction or permanent damage to the structure. A fire in the building could cause it to catch on fire, and the whole thing could be destroyed. The structure could also be blown down by a storm. People walking by could vandalize the open structure. These items can potentially cost the owner of a building a lot. It is important to have insurance that covers these risks.
Negligence
Negligence on the part either of the contractor, or some subcontractors could also cause property damage. This type of damage is not covered under a traditional builders policy if it occurs. It is instead covered by the general liability insurance the general contractor must purchase before starting the job. The property owner will verify that the general contractor is insured before they start any new jobs. The property owner will be able to ensure that the property is insured against all potential damage.
The general contractor will be responsible for any damage caused by a subcontractor. He hired the subcontractor initially. If the damage is severe, the subcontractor might need to file a claim under his liability policy. He may be able fix the problem if the damage is not too severe.
Riders
A property owner may have another option if a new building is not being built but an addition is being made to an existing one. Sometimes, the property owner can just add a rider to his existing property insurance. Many insurance policies will cover add-on construction. Therefore, a new policy is not necessary. It is easier to use one policy, as the add-on is technically part the existing building. If the construction causes damage to the building’s structure, it can be confusing for the owner. A claim must be filed. It is much easier to manage the entire project from one source.
It is a good idea for builders to have insurance before they start any construction project. This insurance protects everyone involved in the project and gives them some security.