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Understanding Builder's Risk Insurance
Builder’s Risk Insurance, also known in some areas as Course of Construction, is a unique kind of property insurance. It's a form of insurance, which covers a building where the building or insured area is presently being constructed. It can cover just the structure, or also the materials on site waiting to be installed or transported to the job site and is a type of insurance that most owners will ask every contractor to carry.
The builder's risk insurance policy will pay for damages up to the coverage limit. The limit must accurately reflect the total completed value of the structure (all materials and labor costs, excluding land value). The construction budget is the best source for determining the appropriate limit of insurance. Builder’s Risk insurance policies can often be written in terms of three months, six months, or 12 months. If the project is not completed by the end of the initial policy term, it can often be extended, but usually only one time.
The builder's risk policy will provide coverage for damage done to the insured structure from a wide variety of events. Damage from the following events will be covered by most policies:
It is really important to highlight this additional information that you should know:
The insurance will not cover the property of others.
Sub-contractors are required to have their own insurance.
There is no coverage for tools or equipment.
No coverage for professional liability
It does not cover accidents at the job site.
Usually, coverage ends when the building is completed or occupied.
The premium for the annual policy is fully earned.
For specific terms, coverage, and exclusions, the original builder's risk insurance policy will determine the applicable coverage.
How Much Does a Policy Cost?
This policy will be in the range of one to four percent of the construction cost, but it will depend on the type of coverage and exclusions that the policy will have. The importance of having a solid insurance company is that they will expedite your claims and will help you solve any potential claims during the construction process. Some companies can cover the soft costs of the project, but you will need to ask the insurance company to include it in your coverage but be aware that this might increase the cost of your builder's risk.
The builder's risk insurance is part of your project's soft costs, and even though it will cost you some money, it is better to have it than not having it when is needed.
Do You Need an Extension?
Extensions of coverage may be provided for certain situations. The coverage for these may be limited. Common builder's risk insurance coverage extensions include: