Builder's Risk Insurance Coverage Options
Builder's risk insurance protects your property from a range of perils during construction or while completing extensive renovations. Can you imagine what the result could be if you weren't adequately protected and disaster struck? You may face crippling financial losses and not be able to continue with the project—causing serious problems for all parties involved.
Protect your property from the start with builder's risk insurance. Krywolt Insurance deals with a wide range of insurance companies offering builder’s risk insurance. Each policy will have unique coverage options as well as warranties and exclusions. It is important to review all details of the project with your broker in order to determine which coverage options suit you best. Some of the coverages available to you include the following:
Natural Disasters
Protect your investment from weather events that could damage the building. This is especially important for sites that are still in the midst of construction, as exposed buildings may be more subject to damage from bad weather. For instance, your builder's risk insurance policy can protect against:
- Wind
- Lightning
- Hail
- Flood
- Earthquake
Accidental Damage
Sometimes while on-site, accidents do happen. And it's important to protect your property from the worse-case-scenario. No matter how diligent your workers are, or how proactive you are to prevent emergencies, disaster can still strike. For example, your builder's risk insurance policy can provide protection against:
- Fire
- Explosion
- Impact by vehicle or machinery
Other Damages
Depending on the type of policy you have, your builder's risk coverage can also protect against other property damage and injury caused by a third-party or unforeseen event. Ensure you clarify with your insurance agent or broker to confirm what is and is not covered by your builder's risk insurance policy. For example, the policy could also protect against:
- Third-party theft
- Vandalism
Additionally, your builder's risk insurance policy may also cover expenses not directly related to construction if the property damage causes a delay. This can include:
- Lost sales
- Rental income
- Additional interest on loans
- Real estate taxes
Additional Coverage
Since each construction project is unique, you have the ability to customize your policy to fit your project's needs. This can be in the form of coverage extensions. Different builder’s risk insurance providers may also offer different options.There are a number of policy add-ons available to elevate your builder's risk insurance policy and ensure all your bases are covered—no matter what type of project you’re working on. Whether you're a contractor or a building owner, it's important to adequately protect yourself and your property with the right coverages. Some extensions available include:
- Protection against perils such as earthquakes and floods
- Soft costs not directly related to construction, such as financial costs, additional interest expenses, leasing and market expenses, legal and accounting expenses and miscellaneous carrying costs
- Delayed opening loss of income, should a delay in completion result in loss of revenue for the project owner
- Protection for damage to scaffolding
- Construction forms
- Temporary structures
- Debris removal and disposal in the event of a loss
- Pollutant cleanup
Other Insurance Policies to Consider
It's important to note that, like most insurance policies, builder's risk insurance is not all encompassing. There are other concerns, such as injury to your employees or a third-party visiting the site, that will also need to be protected against. Some additional policies you may wish to consider include:
- Equipment breakdown insurance, which protects against property damage resulting from the sudden and accidental breakdown of insured equipment that is not automatically protected by a standard property insurance policy.
- Professional liability insurance, which protects against claims of negligence, errors or omissions, design mistakes, or inaccurate advice.
- Commercial general liability insurance, which protects against suits filed due to property damage or bodily injury that occurs at your property.
Talk to your Krywolt Insurance broker today to see what add-ons are available to you through your insurance company, and whether or not you should invest in additional coverages to protect your assets.
What Does Builder's Risk Insurance Cover?
A typical builder's risk insurance policy protects a building while it’s under construction or being renovated. This policy provides protection against losses to the building, equipment and supplies caused by natural disasters, accidents causing a fire or explosion, theft and vandalism. Also known as course of construction insurance, this policy may vary from provider to provider. It also has many extensions available, which provides a more comprehensive coverage.
What is Not Covered by Builder's Risk Insurance?
Builder's risk insurance is not all encompassing, and there are still many perils that you will not be protected against without opting for additional insurance policies. For instance, common exclusions include:
- Injury to employees
- Damage caused by faulty design
- Damage to tools and equipment
- Employee theft
- Flawed workmanship
- Damage to your vehicle
- Nuclear accidents
- Water damage
- Government activities
- Mechanical breakdowns
- Contractual penalties
When Should You Buy Builder's Risk Insurance?
If you're planning to purchase a builder's risk insurance policy, it's integral to get coverage before the project begins. The reason for this is that you may not qualify for coverage if the project has already started. The major risk for a builders risk policy is primarily at the end of the construction but the policy and rates are determined from the day construction starts to completion. Therefore insurance companies may decline to insure a property when construction has already begun or will charge a higher rate or may agree to charge insurance back to the day of construction.
In the event that construction has already started when you are shopping around for a policy, your insurance provider will likely take note of how far along the project is before the coverage start date. Depending on the provider, and the scope of your project, the insurance company may send a representative to your property and confirm how much work has been completed in person. As a rule, always purchase a builder’s risk policy in advance to avoid such inconvenience or additional cost.
Is Builder's Risk Insurance Required?
When first learning about builders risk insurance, many individuals have the tendency to think it's unnecessary. They're under the mistaken belief that their existing insurance policies will protect them during construction projects. However, this is not the case. Other insurance policies will not usually protect your property if it's damaged during construction or a renovation project. That's why it's so important to have an open line of communication with your broker to understand what is and is not protected with your current insurance policy.
Builder's risk insurance is not usually compulsory by law—unlike other types of insurance such as worker's compensation or general liability. However, it may be part of a contractual agreement between parties—especially if the project is funded by a bank or lender.
Even if builder's risk insurance is not required in your contract, it's still worth considering. Think about whether or not you'd be able to afford to replace or repair damage to your building out-of-pocket. If the answer is no, then don't take the risk. Ensure you're adequately covered with the right insurance policy.
What Types of Property Does Builder's Risk Insurance Cover?
Essentially, any type of property, commercial or residential, government funded or private, that is undergoing construction or a major renovation can be covered by builder's risk insurance. Whether or not you opt for the coverage is usually up to the individual—unless otherwise stipulated in a contract. A few examples where builder's risk insurance would be needed includes:
- Residential new construction
- Residential remodelling or smaller projects, such as replacing windows and doors
- Model homes and model home contents
- Commercial property construction
- Adding a second storey or addition to the property
- Any other kind of major renovation
Is Property Insurance the Same as Builder's Risk Insurance?
No. Property insurance is a traditional type of policy that covers an existing structure. While it covers some of the same perils as builder's risk insurance, such as damage from fire, theft and severe weather, it only protects your property when there is no construction underway. Contrarily, builder's risk insurance only protects your property during construction. The policy is usually designed to end around the same time that your project should be completed.
Do I Need a Builder's Risk Policy if I Already Have Contractor's Insurance?
Yes. Generally, contractor's insurance policies protect against lawsuits or claims that arise from property damage or bodily injury that may occur on a construction site. The policy covers claims and settlements that might happen during and after the project is completed.
However, contractor's insurance does not necessarily protect against the same amount of perils as a builder's risk policy. To fully understand what is and is not covered by your insurance provider, you should schedule an appointment to talk to your local Krywolt Insurance broker. Any one of our dedicated brokers will be able to clearly lay out what kind of coverage you need, so you never have to worry about paying for damages out of pocket, or not being compensated due to a loss or injury.
How Much Does Builder's Risk Insurance Cost?
Every builder's risk insurance policy is different, and the cost of your unique policy will vary depending on what you need. For example, your policy may require more coverage, or you may want to add extensions to provide additional protection for your construction project. There are a few factors that influence your builder's risk insurance policy, including:
- Construction materials
- The type of protect
- Policy details, like coverage amounts and limits
- Previous claims
In general, you want to choose coverage limits that are equal to the anticipated cost of construction. This will impact the cost of your insurance rate, as the more expensive the project is the higher your insurance rate is likely to be. Other factors that will affect premium are the location of the coverage including whether there are fire hydrants close to the property or service by a corresponding firehall.
The best way to establish the cost of your builder's risk insurance policy is to contact a Krywolt insurance broker today and ask for a quote. Our team of dedicated brokers can be reached at 403-475-5434 or via our online form.
