Before deciding on builder’s risk coverage, be sure you know these key factors.
Builders risk coverage insures against risk of loss from damage to property under construction, whether it’s a new construction or a renovating of existing buildings. Home builders and remodelers should understand that builders risk coverage presents issues not commonly associated with property coverage for existing buildings. Before you select your coverage, understand these key considerations.
A primary consideration is what property to insure. Renovation projects should have coverage that insures both the existing structures and the new construction. An example of this is that recent development projects involve converting industrial or warehouse space into residential and retail space. This typically requires the existing building to be gutted and have new systems and interiors constructed. Coverage for any damage should envelop the current interior to protect the project.
Another consideration is who should be insured. The construction documents will usually require the owner and the general contractor to be covered by the same builder’s risk policy. Some builders risk programs will insure certain material suppliers, but this is not always the case. However, if the material suppliers are not insured under the builder’s risk policy, contingent business interruption coverage should be obtained to cover any loss to a key supplier’s facility.
Time Element Coverage
Two of the most important considerations in a builder’s risk policy are the type of time element coverage which is included and the deductibles. Time element coverage includes business interruption, extra expense, expediting expense and “soft costs.” The purpose of soft costs coverage is to insure the economic risks caused by project delays resulted from a covered peril, such as advertising and promotional expenses, commissions or fees for the renegotiation of leases, interest on construction loans, and taxes among others. Policyholders should make sure that the soft costs endorsement includes the soft costs which will be incurred by all insured parties.
Builders risk coverage presents unique issues which should be addressed before construction begins. As valuable protection for your project and finances, you’ll want to ensure that you’ve got adequate coverage before starting your project. To get started, contact Nahai Insurance Services. We can tailor the right builder’s risk insurance for your upcoming project. Call us today!