Building construction is not an easy project for most of your clients. These clients should take all costs into account, which could easily exceed a million dollars. Most likely, your clients already have insurance in their administrative costs, but might not have comprehensive builder’s risk coverage. Some clients are still a startup, which means they may still be looking for the best insurance.
What is Builder’s Risk Insurance?
This insurance policy covers construction projects, whether it’s residential or commercial. Construction projects are either renovation, new building, or remodeling.
Builder’s Risk Insurance protects your client from unexpected financial losses. These losses result from fortuitous events such as fire, flood, earthquake, and destructive events such as theft and vandalism.
However, not all destructive events are covered in the policy. Thus, your clients must understand and know the extent of their coverage.
Your client must fully understand the limitations of the policy, too.
Some policies cover the whole structure, including supplies. Others only indicate specific parts of the building being constructed, renovated, or remodeled.
Do Your Clients Need Builder’s Risk Insurance?
Yes, your client needs a builder’s risk insurance whether their project is fully funded or not. The ultimate goal is to assist your clients during accidents, unprecedented events, and other disastrous circumstances.
Any financial loss on the part of your client could be detrimental to them. Indeed, they may have the funds to cover litigation costs or repair costs, but there are other players in the business.
One instance is their reputation. Litigations due to injuries inflicted on persons, intentional or not, can ruin your client’s reputation in the business. Potential employees and clients will deem this as carelessness.
Who Pays for the Insurance?
Your client (the general contractor) could pay for the insurance. Alternatively, they can get it in conjunction with other people involved in the project.
Besides your client, the building owner, project manager, or site engineer can avail of the Builder’s Risk Insurance. Your client can specify these parties as named insureds or unnamed insureds in the policy. These parties gain protection from litigation and losses.
When Does Your Client Need the Builder’s Risk?
Your client needs to have at least 2 years of experience in the construction industry. Some providers require at least 3 years.
Also, your client must buy the policy when the project is less than 30% completed. The coverage will last until 90 days after construction is completed or the owner possesses the building.
What is Included in the Insurance Policy?
Builder’s Risk Insurance protects your client from fire, explosion, lightning, theft, and vandalism.
Aside from these, your client can include risk factors such as malicious employee acts, water damage, wear-and-tear, incidents that could happen to materials-in-transit, and mechanical/equipment breakdown.
For non-traditional inclusions, your client can request earthquake and flood as part of the coverage. They can even extend the coverage. However, they have to pay an additional fee.
How Much Does Your Client Have to Pay for the Premium?
The insurance premium depends on coverage, inclusions, exclusions, and extensions. Another factor is the size of the project.
For rough estimates, your client could pay up to 4% based on the total construction cost. The construction cost includes materials and labor but excludes land value. In terms of amount, the premium could range from a few hundred to a few thousand dollars.
Is Builder’s Risk Insurance Enough?
The answer depends on several factors. If your client deals with small contracts, this could be enough. However, if they have employees, use automobiles or technology, this policy may not cover other risk factors.
Your client might need to include other types of insurance to cover all operations of the construction fully. These policies are workers’ compensation, general liability, umbrella policy, and others that are useful and helpful during slow times.
Final Words
Construction projects are filled with challenges and are one of the riskiest industries. Your client has to properly evaluate these risks to determine inclusions and exclusions in the builder’s risk insurance.
They need to understand that this policy isn’t just a form of financial assistance. More importantly, a builder’s risk insurance is a form of security for all the people involved.
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.
