What is Builders Risk Insurance?

June 23rd, 2011 by Jake No comments »

Building Your Own Home For Dummies.

Builder’s risk insurance (sometimes incorrectly referred to as “Course of Construction” coverage) is designed to protect the contractor and the owner of the property from property loss on a building or buildings under any construction.

It is worth investing in obtaining a comprehensive, correctly valued builders risk insurance when buildings are under construction, as they are much more vulnerable to things like weather, theft etc. during this period. Setting this up properly can be  a life saviour if disaster strikes, and can make the difference as to whether you can finish your project or not.

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Usually a builders risk insurance contract will specify the property owner, the contractor, and Helpany subcontractors as all being insured. Whether the contractor or the owner is responsible for getting the insurance set up will depend on the contract, it’s not always one or the other. If , the contractor, is responsible for getting the insurance, you can add it to the cost of the contract.

In some cases where the property owner has multiple building, such as a city or corporation, the property owner’s existing insurance policy (commercial builders risk) will include builders risk (usually only for smaller projects).

General Contractors will often have a blanket basis builders risk policy (a sort of contractors risk insurance) using a reporting form, ın order that on a monthly basis they are able to include new work, and remove those that happen to be finished.

Whatever the case, each project will have its own builders risk coverage.

Though it is often defined as being the same as course of construction insurance, it really is a specific policy, that covers property only. It can be written for a specific location, or as a blanket insurance for property on several locations that are currently under construction . It can be written to include materials BEFORE they are added to the structure.

Course of Construction on the other hand is a general term, that can include builders risk, but usually also includes some premises liability coverage. It might include General Liability for the General Contractor, or it might not. It may or may not include OCP. Course of Construction is not a real name, just a commonality that a lot of contractors use. So when someone uses it, you have to pry a bit, and get more information about what exactly they mean, out of it.

Note: Only property damage is covered, Builders Risk Insurance doesn’t protect against accidents on your property, this would need a separate general liability type of insurance cover.

builders risk insurance definition

Who needs builders risk insurance?

Well if you are planning to build up your property or adding to an existing building you need to get one. Basically builders risk insurance also known as course of construction insurance, is a property insurance policy designed to provide coverage for buildings while they are under construction.

So if anything goes wrong you should be covered and be able to recover your expenses depending on what is covered up to the cover limit – includes materials at the site, the built up structure and labour cost, but not the land value.

It will be worth checking our article “Builder’s risk coverage” to find out what is normally covered by builder’s risk insurance, as well as our article “Builder’s risk insurance exclusions” for what is generally excluded from builder’s risk.

When getting a builder’s risk policy you can choose to just cover the structure, or you can cover both the structure as well as the  materials on site waiting to be installed and you can even cover materials that need to be transported to the job site as long as you identify the storage location.

Based on inland marine insurance, a Builders Risk policy is still very much a form of inland marine insurance, this means that it incorporates a similar “special form” coverage to that used in a commercial property policy.

What that simply means is that what the policy must specifically list exclusions, or what is not covered.

Builders Risk Insurance Exclusions

December 19th, 2012 by Jake 2 comments »

What are Builders Risk Insurance Exclusions? and Why are the Exclusions Important?

All insurance policies have exclusions, usually things like war, many natural disasters and arbitrary government changes resulting from change of government or policy. So while the previous exclusions are also included in most f builders risk insurance exclusions, insurers have also add actions that are common and difficult to prevent, such as employee theft, breakup of say any two or more parties crucial to the completion of the project, any penalties and more.

Some of the most common exclusions are listed below

  • Earthquake;
  • Flood and other water damage;
  • Weather damage to property in the open;
  • War;
  • Government action;
  • Contract penalty;
  • Voluntary parting;
  • Mechanical breakdown; and
  • Employee theft

Also excluded are damage done due to faulty construction. This is because the coverage on any Builder’s risk insurance policy is intended to cover sudden and accidental events, not poor construction. What this means is that the Builder’s Risk exclusions will not cover any damage caused by faulty:

  • design
  • planning
  • workmanship or
  • materials

Some insurance companies allow you to include some of the common exclusions, usually on a one-on-one basis. The most common ones you may want to include are earthquake, flood and weather damage, especially if the building under construction is in an area that is prone to one or more of these natural disasters.

I cannot emphasize enough that it is extremely important that you read the exclusions clause carefully and in its entirety, to make sure you will be fully covered. Assumptions can be quite painful both financially and in terms of time and effort. When something happens you may end up in a serious lurch, unable to finish your project and be out of time and money, if something like a flood occurred in an area prone to floods, and you are not covered.