Some common Builders Risk features:
The main feature of builders risk insurance is the type of structures which are covered under a policy during construction. These would include the following:
- New structures on the property
- Any additions to a structure currently in progress
- Fixtures and equipment considered part of the building such as boilers, HVAC or Electrical systems
- Temporary structures such as construction offices
- On-site materials used in the building project
- Soft Costs (checklist)
Two types of builders risk insurance:
Specified peril policies cover only what is mentioned within the policy. This is the type which would cover individual hazards that happen only to the building
This type of insurance policy is the opposite of specified peril in that it will cover every hazard except those excluded from the policy. All risk policies do not list what is covered. This policy is usually more expensive because of the extent of the coverage.
Builders risk insurance is a required policy for most new construction and remodeling projects which require a contractor. Both municipal building codes and financial lenders will not approve many construction projects without proof of this insurance.
The responsibility by law for this type of insurance is with the contractor, but is payable to the property owner because the owner becomes liable for any losses during the project.
Some considerations which a property owner may want to look at during a construction project include the possibility of the current property insurance coverage including the building project if it involves an existing building as well as having the proper underwriting information to help with purchasing this type of policy. When you purchase builders risk insurance as a property owner you should verify what the policy covers and add stipulations for poor drainage, sinkholes or wind damage caused during construction.
If you are the contractor for a building project, you will want to ensure that everyone involved in the project is named in the policy, including subcontractors and equipment owners. You should also confirm your costs relating to errors in design, faulty workmanship and any changes in laws or costs relating to interruption of the project. A review of any policies held by the property owner will help ensure these policies are compatible with a builders risk insurance policy.