While being involved in the construction process for a new building or structure is exciting, it also carries numerous risks. After all, a wide range of events could threaten the success of such a project—potentially resulting in costly delays and property damage. In fact, recent research from the National Fire Protection Association found that buildings under renovation or construction are more likely to experience fires than finished structures. Fires account for over $300 million in property damage each year. It's essential to have proper coverage so that losses can be minimized when events like these occur. Fortunately, that's where builders risk insurance can help. Here's an overview of what builders risk insurance covers, how it works and who needs it.
What's Covered?
Builders risk insurance is a temporary form of coverage that provides protection for a building or structure throughout construction. This type of policy generally offers assistance for damages caused by various events—including lightning, wind, hail, fires, explosions, theft and vandalism. In these circumstances, builders risk insurance can help cover the costs of restoring any damaged property at the construction site. Property that is covered includes the building or structure itself, equipment, materials and supplies. Further, if such property damage results in additional complications—such as project delays or lost income—builders risk insurance can help cover these expenses. It's important to note that most builders risk insurance policies exclude protection for damages stemming from certain events. Common coverage exclusions include acts of terrorism, wear and tear, employee dishonesty, mechanical breakdowns, poor workmanship and faulty materials or design.
How It Works
This type of policy usually begins on the same date that the associated project contract gets signed. Coverage typically concludes once the project is finished. However, not all builders risk insurance policies are the same; different policies may have varying triggers that signal the start and end of the coverage.
Who Needs It?
Regarding who needs builders risk insurance, it's crucial for anyone who holds a financial interest in the construction project, including the property owner, contractors and subcontractors. With this in mind, construction employers like you can't afford to ignore this form of coverage when securing project contracts for the development of new buildings or structures. However, purchasing builders risk insurance is just one element of your overall risk management program. Implementing effective loss control measures at the construction site is also critical to prevent costly incidents and mitigate potential claim costs.
For additional construction-specific guidance and insurance solutions, contact us today.