Builder’s Risk Insurance (Course of Construction) protects the insurable interest of an owner, general contractor or subcontractor during construction, repair or renovation. During the process of construction, these folks have invested labor, materials and funds and risk incurring a financial hit if the property is damaged or destroyed before completion. A builder’s rick insurance will protect the investment up to the limits stated within the terms of the policy.
There are different kinds of Builders Risk Insurance policies available: wrap-up, owner controlled, contractor controlled, owners and contractors protective liability, specified perils, and all risk insurance. Not all damage is covered. Certain weather events, fire, theft or vandalism are covered but loss from employee theft, municipal intervention, water damage, defective design, workmanship, and materials are not covered.
What Builders Insurance is Right for You?
Determining the amount and type of coverage that you need requires a review of your business functions and exposures. You may need one type or a combination to provide you with the comprehensive coverage tailored to you.
Get the proper coverage.
When constructing or remodeling any kind of property, Builder’s Risk Insurance will give you the coverage you need to protect your investment in materials and your assets and equipment during the construction process.
Some Builders Risk Insurance Options to Consider
Builder’s Risk policies can be purchased for 3, 6, or 12 months and usually they may be extended once. The standard policy will cost one to three percent of the project budget. The policy can be purchased by either or all of the contractors and owners to protect their personal interests and exposures. If one policy is purchased to cover everyone, you will have to weigh the benefits (controlling the amount of coverage, being privy to all communications for the insurer and having the ability to change coverage) versus the risks (if a claim is made, the primary insured is responsible for paying the deductible).
All Risk Policy will insure all occurrences except for any specifically listed as excluded within the terms of the policy. To avoid the appearance of coverage for literally all risks, some policies will use the phrase “open perils coverage” or “special perils coverage”. The benefit to this type of coverage is that the insurance company will have to pay for damages or losses (up to the limits of the policy) unless it can prove that the loss was the direct result of an excluded hazard.
Specified Perils Policy (also called Named Perils Policy) will cover only the perils listed in the policy. The wording of the policy will say something to the effect of ‘we will cover property loss as the result of the following perils: fire, hurricane, tornado’. This option is beneficial in that the business can tailor the coverage to the risks its most exposed to. The drawback is that if a loss occurs, the insured will have to prove that it was the direct result of only a hazard covered in the terms of the policy.
Owner Controlled Insurance Program (OCIP) is a type of Wrap-Up Policy which is supplied by the developer or owner of a property. OCIP is usually preferred for large projects to, protect all the contractors, subcontractors and independent contractors involved. Wrap-up policies are beneficial not just for economies of scale, but also to streamline safety standards/expectations and to reduce the incidence of litigation due to workmanship standards and allegations of injury between the various parties involved in the project.
Owners and Contractors Protection (OCP) is a liability policy for the insured for injury or property damage caused by an independent contractor. This is considered vicarious liability, as the one who purchases the policy is indirectly responsible for the contractors that are not employees of his/her company. This protection includes coverage against litigation stemming from damage caused by subcontractor/independent contractor and from lawsuits regarding supervision over said subcontractors/independent contractors.
Installation Floater is coverage for contractors and their property/equipment. While on a job, contractors with a specialty service (such as masonry, drywall, painting, plumbing) may have equipment, machinery, property and supplies on site or in transit between sites for an extended period of time that is exposed to the risk of damage or theft. Extensions are available for a builder’s risk insurance policy at an additional fee. The kinds of property that may need to be included are for temporary structures like scaffolding or materials and equipment that are temporarily stored (on or off site).