Building and construction projects are complicated with no shortage of things that can go wrong. With everything that can happen during the construction process, it is essential to have the proper insurance in place. Of all of the different insurance coverages to consider, builders risk insurance is one of the most essential for companies in the construction industry.
While builders risk insurance, also sometimes referred to as course of construction insurance, is important, it is also very complex and easily misunderstood. This Coverage Insights examines what you need to know about builders risk insurance and how it can protect your company.
What Is Builders Risk Insurance?
Builders risk insurance is a specialized type of property insurance that is intended to provide protection for buildings and structures that are under construction. These policies protect project owners, general contractors and subcontractors against direct physical loss or damage to covered property.
In many instances, builders risk policies also provide coverage for materials and supplies that are on-site, in transit and being stored temporarily at off-site locations if they are intended to become a permanent part of a building or structure. What’s more, builders risk policies can be written to include coverage for loss of income and additional expenses. This coverage would apply if the completion of a project is delayed due to property damage caused by a covered cause of loss.
Builders risk coverage is a temporary form of insurance. Coverage applies only during the course of construction, erection and fabrication. In most cases, builders risk coverage stays in force until a construction project is accepted by the project owner or once construction is considered complete. Once construction is completed, it is up to the owner of the building or structure to secure traditional property insurance.
Another thing to keep in mind is that there is no standard form of builders risk insurance. Policies can vary between insurance companies, and, in many instances, the coverage terms of a builders risk policy can be negotiated. In most cases, builders risk policies are written on an “all risk” basis. This means that coverage applies for all causes of loss except those specifically excluded by the policy.
What Am I Protected From?
Builders risk insurance can cover a wide range of causes of property damage. The exact parameters of your policy may vary, but in general, builders risk insurance includes coverage for the following causes of property damage:
-
Fire
-
Wind
-
Hail
-
Theft
-
Lightning
-
Explosion
-
Impact by vehicle or aircraft
-
Vandalism
It is important to comb over your policy carefully in order to make sure you are aware of what is and isn’t covered under your builders risk insurance. Builders risk policies often do not provide coverage for property damage caused by flaws in design, planning or workmanship. Other specific exclusions may be included in your policy. While exclusions vary from policy to policy, the following cases of loss are typically not covered under builders risk policies:
-
Property damage caused by employee dishonesty or theft
-
Property damage caused by earthquakes
-
Acts of war
-
Government actions
-
Mechanical breakdowns
Understanding Coinsurance Amounts Premiums
An important aspect of builders risk insurance that often gets overlooked is the coinsurance amount. Coinsurance is a provision that requires the insured to carry insurance equal to a certain percentage of the value of the property. This percentage is typically 80%, 90%, or 100%, depending on the policy.
The coinsurance amount directly impacts both your premiums and the outcome when a covered event occurs. Here’s how:
Premiums
-
Higher Coinsurance Percentage: A higher coinsurance percentage typically results in lower premiums. This is because you are agreeing to insure a higher percentage of the property value, which reduces the risk for the insurer.
-
Lower Coinsurance Percentage: Conversely, a lower coinsurance percentage may lead to higher premiums since you are insuring a smaller portion of the property value, which increases the risk for the insurer.
During a Covered Event
-
Meeting Coinsurance Requirements: If a covered event occurs and you have met the coinsurance requirement, your claim will be paid in full, up to the policy limits, minus any deductible.
-
Not Meeting Coinsurance Requirements: If you fail to meet the coinsurance requirement, the insurer may reduce the amount paid on a claim. This reduction is proportional to the amount of underinsurance. For example, if you only insured 70% of the required 80%, the insurer may only cover 70% of the loss.
Understanding and meeting your coinsurance requirements is crucial to ensure you are adequately protected and can avoid significant out-of-pocket costs in the event of a loss.
Talk to a Risk Advisor
Builders risk insurance is necessary coverage for many businesses. Remember, we’re here to help you with all of your construction industry insurance needs. Protect your project, your wallet and your company by contacting Bickle Insurance to discuss builders risk insurance today.
Text- 740.593.7311 or 937.382.5545
Email-
Don’t forget to like and follow us on our social media accounts!
