Commercial property insurance policies are created for buildings that are already fully built and operating, but how do you insure a building during construction? People often assume that the contractor has insurance for this, but it’s often not the case. This is where a builder’s risk insurance policy would come into play. In order to fully explain what a builders risk insurance policy offers, we have taken the time to break down the subject to make it a little easier to digest.
What is a Builders Risk Policy?
Builders risk insurance is specifically designed to insure property loss to buildings and structures while they are under construction. Damage to a building while it is being constructed is a huge concern for everyone on the job site, and a Builders Risk policy can be purchased by the building owner and the general contractor constructing the building depending on the situation.
Does the Contractor Need a Builders Risk Policy?
If you are a general contractor that is building a house, there is a good chance you’re going to want a builders risk insurance policy. The contractors CGL policy likely does not have coverage for the property being built and will not respond to any loss on the house being built unless the damage was caused from the contractors negligence.
If the contractor is building the house on the property of the building owner, then the building owner is likely the one that should be obtaining the builders risk insurance policy. In life as in insurance, there are no easy cookie cutter answers for all of the possible scenarios and you should confirm all situations with your insurance professional.
What Types of Coverage are Available?
There are a wide range of coverages available from a wide range of insurance companies throughout the country. It is always suggested that you double check the coverages from your own insurance policy or to talk to an insurance professional who can walk you through the coverages. The most common types of coverages on a builders risk insurance policy are:
- Residential or commercial ground-up construction or renovation
- Theft of Building Materials
- Project Specific or Blanket Coverage
- Premises Liability for Owners
- Wrap Up Liability
- CGL for Trades & Contractors
- Contractors Pollution Liability
- Liability for Vacant Land
In closing it is important to note that your CGL will most likely not respond in the event the house you are building has a loss. If you are a contractor and are building houses, you will want to make sure you discuss how you could be responsible if something happens to that home while it is being built and all other aspects of a Builders Risk policy and your current CGL with your insurance professional.