If you’re already offering builder’s risk insurance to your clients, you’re already heading in the right direction. This is one of the most important insurance plans available to builders, contractors, and developers, providing added benefits on top of other types of insurance.
Like many insurance plans, commercial builder’s risk package NY allows for a considerable degree of customization with regard to the different options. Some of these options may not be necessary depending on the location, circumstances, or nature of the project. However, others are absolutely essential and should be included at all costs.
How would a contractor or builder determine which builder’s risk options are unnecessary and which are must-haves? This requires a careful analysis of the risk factors that could potentially affect the project in question. Again, this differs from case to case. For example, a construction project with a high likelihood of causing environmental pollution may require a different set of options than a piece of rental property.
In the same way, flood coverage would be an indispensable option in a house in a flood-prone area. In a community where brush fires are common, fire coverage might be a higher priority.
Before we go into more detail on the options that builders shouldn’t go without, let’s take a closer look at builder’s risk insurance and what it entails.
What is builder’s risk insurance?
Builder’s risk insurance covers the cost of losses and damage to construction projects in progress. Available to construction firms, contractors, and subcontractors, it is a short-term insurance policy that protects against risks that aren’t covered by most home and personal insurance plans.
Builder’s risk insurance could be useful when breaking ground on a new construction project. Let’s assume that the contractor has completed planning for the construction process, obtained the necessary permits, hired subcontractors, and signed up for general liability insurance.
While all of these are necessary for the project to get off the ground, the contractor in question may still not have all the coverage they need. In particular, general liability insurance policies may not cover property damage that could occur during the building process. Some plans won’t even provide any coverage at all.
Without builder’s risk insurance, contractors may not cover material damage or losses resulting from fires. Although general liability insurance provides some degree of coverage, only builder’s risk insurance will fully cover losses or damage that could occur while the structure is being built.
Coverage and exclusion of builder’s risk insurance
The coverages and exclusions of builder’s risk insurance vary depending on the provider and the project in question. But most such plans cover only events and circumstances that the builder has no control over.
That being said, some plans do cover material and construction defects, along with certain losses or damage. Even so, there are still usually exclusions to the coverage provided.
Most builder’s risk insurance covers losses or damages caused by the following:
- Fire
- Storms and related weather occurrences
- Vandalism
- Theft
- Explosions
Some policies may also cover the following:
- Expenses resulting from lost sales
- Rental income
- Loan interest
- Real estate taxes for delayed construction projects
- Damage of temporary structures
- Cleaning and debris removal
- Pollution disposal
- Project modifications necessary for conforming to environmental requirements
Builder’s risk insurance usually doesn’t cover the following:
- Earthquake related damage
- Flood damage
- Hurricane damage to construction projects in beach zones (this may be subject to inclusion depending on the area or the purchase of riders)
- Wear and tear due to the passage of time
- Corrosion
- Rust
Most plans also exclude coverage for employee theft, damage, accidents resulting from substandard materials and processes, and acts of terrorism.
Additional insurance policies to consider
In addition to builder’s risk insurance, construction businesses and general contractors should also consider getting the following:
- Contractor’s equipment insurance. Covers reimbursement costs for stolen or damaged equipment up to five years old.
- Workers’ compensation insurance. Covers the medical bills and lost wages of employees injured on the job.
- Professional liability insurance. Covers settlement and legal costs resulting from client lawsuits related to construction errors or oversights.
- Auto insurance. Covers the cost of damages resulting from the use of company-owned vehicles.
These types of insurance should compensate for the usual exclusions on most builder’s risk and general liability insurance plans.
As you can see, builders’ needs tend to differ considerably based on various factors affecting the construction project. So, ideally, you should provide a wide range of builder’s risk options to your clients. As insurance brokers, they could then offer a selection of insurance options that offers the most benefits.
About Snyder Specialty
Snyder Specialty, LLC is a New York-based underwriting facility that provides a range of property and liability solutions for personal and commercial lines. Specializing in coastal properties and hard-to-place risks, Snyder Specialty expands your current capabilities with proven solutions for complex risks. Find out more about the company’s range of services by calling (718) 362-8039.
