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<p class="has-black-color has-text-color has-large-font-size">Builder’s risk insurance provides property coverage for buildings and structures that are under construction. If you’re a builder or a commercial property owner, you could face considerable monetary loss if something goes wrong with the construction of a building and you don’t have builder’s risk insurance.</p>
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<p class="has-black-color has-text-color has-large-font-size">Here’s what you need to know about builder’s risk insurance, what it covers and what it doesn’t cover.</p>
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<h2 class="has-black-color has-text-color has-extra-large-font-size">What Is Builder’s Risk Insurance?</h2>
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<p class="has-black-color has-text-color has-large-font-size">Builder’s risk insurance covers property and construction materials during a project. It’s also called “course of construction insurance.”</p>
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<p class="has-black-color has-text-color has-large-font-size">Builder’s risk policies are available for new construction projects, remodeling and installation work. Projects are classified as either commercial or residential risks.</p>
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<h2 class="has-black-color has-text-color has-extra-large-font-size">Who Needs Builder’s Risk Coverage?</h2>
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<p class="has-black-color has-text-color has-large-font-size">Types of people and businesses who can benefit from builder’s risk insurance include:</p>
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<ul class="has-black-color has-text-color has-large-font-size"><li>Architects</li><li>Builders</li><li>Building owners</li><li>Development and investment companies</li><li>Engineers</li><li>General contractors</li><li>Lenders</li><li>Subcontractors</li></ul>
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<h2 class="has-black-color has-text-color has-extra-large-font-size">What Does Builder’s Risk Insurance Cover?</h2>
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<p class="has-black-color has-text-color has-large-font-size">Builder’s risk insurance protects builders against multiple types of problems, including:</p>
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<ul class="has-black-color has-text-color has-large-font-size"><li>Fire</li><li>Lightning</li><li>Hail</li><li>Explosions</li><li>Theft</li><li>Vandalism</li><li>Hurricanes and other “acts of God”</li></ul>
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<p class="has-black-color has-text-color has-large-font-size">A builder’s risk policy may cover:</p>
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<ul class="has-black-color has-text-color has-large-font-size"><li>Buildings and structures that are under construction, including temporary storage buildings, fencing and scaffolding</li><li>Equipment, such as repair of damaged equipment, as long as the equipment is covered under the policy</li><li>Materials and supplies being used</li><li>Constructions signs, trees and plants</li><li>Valuable papers such as blueprints, and electronic data</li><li>Labor</li><li>Ordinance and law costs, or the increased cost to repair or rebuild due to building codes and laws at the time of the loss</li></ul>
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<p class="has-black-color has-text-color has-large-font-size">Builder’s risk policies may also cover the following “soft” costs that result from construction delays:</p>
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<ul class="has-black-color has-text-color has-large-font-size"><li>Additional interest on loans</li><li>Lost sales income</li><li>Real estate taxes</li><li>Rental income</li></ul>
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<h2 class="has-black-color has-text-color has-extra-large-font-size">What Does Builder’s Risk Insurance Not Cover?</h2>
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<p class="has-black-color has-text-color has-large-font-size">Not everything is covered under a builder’s risk insurance policy. For example, earthquakes and floods are generally not covered, but you can buy additional insurance for those problems. Here’s a short roundup of other common exclusions:</p>
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<ul class="has-black-color has-text-color has-large-font-size"><li>Acts of terrorism and war</li><li>Damage due to a faulty design</li><li>Employee theft</li><li>Mechanical breakdowns</li><li>Rust and corrosion</li><li>Wear and tear</li></ul>
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<p class="has-black-color has-text-color has-large-font-size">Be sure to check a policy’s exclusions before buying it. You want to be aware of what costs you’ll be paying if the worst happens.</p>
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<h2 class="has-black-color has-text-color has-extra-large-font-size">The Cost of Builder’s Risk Insurance</h2>
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<p class="has-black-color has-text-color has-large-font-size">The median cost of builder’s risk insurance is typically&nbsp;<strong>$95 a month</strong>, according to Insureon. It is a good idea to choose coverage limits that are equal to the estimated costs of construction.</p>
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<p class="has-black-color has-text-color has-large-font-size">Exact coverage and policy limitations will vary among insurance providers. So be sure to shop around for both coverage and price.</p>
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<h2 class="has-black-color has-text-color has-extra-large-font-size">How To Find the Right Builder’s Risk Insurance Policy</h2>
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<p class="has-black-color has-text-color has-large-font-size">Shopping for builder’s risk insurance is similar to buying other insurance: You need to decide what coverage you need and compare rates from multiple insurance companies. There are some differences to understand, too.</p>
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<p class="has-black-color has-text-color has-large-font-size">Here’s how to find the best builder’s risk insurance policy for your situation:</p>
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<h3 class="has-black-color has-text-color has-extra-large-font-size">Figure out how much coverage you need</h3>
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<p class="has-black-color has-text-color has-large-font-size">Think about the project and where your risks are. This should include transportation, materials, the construction site and storage.</p>
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<p class="has-black-color has-text-color has-large-font-size">Based on your risk, you can decide on the coverage.</p>
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<h3 class="has-black-color has-text-color has-extra-large-font-size">Decide when you need insurance to start</h3>
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<p class="has-black-color has-text-color has-large-font-size">You typically need coverage once the contracts are signed. Your policy will include information about when coverage begins.</p>
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<h3 class="has-black-color has-text-color has-extra-large-font-size">Estimate how long you need coverage</h3>
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<p class="has-black-color has-text-color has-large-font-size">Builder’s risk insurance typically ends when the project is done. The policy should include specific conditions for when the coverage ends. That may be when the policy expires, when the building is occupied or when the building is being used for its intended use.</p>
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<h3 class="has-black-color has-text-color has-extra-large-font-size">Understand the coverage</h3>
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<p class="has-black-color has-text-color has-large-font-size">A builder’s risk policy excludes costs associated with repairs or correcting faulty work associated with a subcontractor. But a policy with an ensuing loss provision may cover damage and faulty work.</p>
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<p class="has-black-color has-text-color has-large-font-size">Exclusionary provisions differ by policy, so make sure you understand the policy to avoid bad surprises.</p>
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<h2 class="has-black-color has-text-color has-extra-large-font-size">Builder’s Risk Insurance vs. General Liability Insurance for Contractors</h2>
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<p class="has-black-color has-text-color has-large-font-size">General liability insurance for contractors does not cover a contractor’s property. You’ll need a builder’s risk insurance policy.</p>
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<p class="has-black-color has-text-color has-large-font-size">A general liability insurance policy offers coverage if you are responsible for causing injury or property damage to someone else. It also pays associated legal fees.</p>
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<p class="has-black-color has-text-color has-large-font-size">As for damages, general liability insurance for contractors protects against fire and explosions that cause damage to someone else.</p>
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<p class="has-black-color has-text-color has-large-font-size">A general liability insurance policy for contractors will typically cover:</p>
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<ul class="has-black-color has-text-color has-large-font-size"><li>A person getting injured on your property</li><li>A commercial space getting damaged</li><li>You or an employee causing injury or property damage</li><li>You getting sued for false advertising, libel or slander</li></ul>
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<p class="has-black-color has-text-color has-large-font-size">For those in the construction business, having both builder’s risk and liability insurance is a smart move.</p>
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<p>To read the full article, <a href="https://www.forbes.com/advisor/business-insurance/builders-risk-insurance/">click here</a>.</p>
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