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Real Estate Construction: Builder’s Risk Insurance Details

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Building construction

The Need for Construction Industry Insurance

Builder’s risk insurance ensures that the insurance company will cover any equipment, materials, or property, damaged during construction, but there is a limit to this. For example, the loss must be clearly specified and included under what the insurance company considers to be “covered property”.

Construction industry insurance protects structures that may suffer damage during the building process. Unlike other policies, this one is fairly broad, and it can apply to things like construction machinery and other miscellaneous equipment. It also tends to cover appliances, materials, and even fixtures that are used. Even temporary structures that are used during construction, such as trailers, can also be protected under this sort of policy.

Features of This Policy

Below are some of the features you should be aware of when it comes to builder’s risk insurance policies:

  • The quality and type of construction are taken into account. While all construction projects are different, those buildings that are made of steel and concrete will have a lower rate. The majority of buildings, however, can be covered, including most warehouses, shopping centers, office buildings, farm structures, condominiums, and homes.
  • There are a few involved who can take on this coverage. Construction industry insurance, particularly policies that related to builder’s risk, can be given to the contractor, the owner of the building, or the contractor and the owner jointly.
  • You’re covered until it expires or other factors end the policy. This coverage will continue until the policy expires, the building is sold, or the insured individual’s interest terminates. Some policies allow for the extensions of coverage beyond the expiration date, but you will have to pay another premium. In general, coverage will end when the building is at least partially occupied, when it’s been put into use, or 90 days from the time that construction terminates.

Determining Your Premium

Builder’s risk insurance can sometimes be expensive, but there are other mitigating factors at play when it comes to the premiums. One important consideration in determining your construction industry insurance rate is one we have actually already touched on: the type of materials used. The reason metal and concrete buildings are not as expensive to insure is due to their increased ability to resist damage during construction.

Additionally, there are a number of safety measures you can implement that will discount your premium. Sturdy fencing to keep people away from the dangers of a construction zone without the proper clearance and safety equipment, as well as proper lighting, can result in discounts. If the property is in an area prone to high crime, you might be required to provide a guard dog or security guard before you’ll be able to receive a policy.

Fire safety is also important. Measures such as sufficient sprinklers and good access to firefighting equipment will all come into play when determining your premium. You’ll even need to consider the properties next to you. Insurance companies may look at whether any structures pose a risk to yours, as well as whether brush or high wind could adversely affect your structure.

A great deal of focus in construction industry insurance rests on tangible factors, such as the ones we’ve mentioned. However, intangible factors, such as the training and experience of the personnel, the expertise of the builder, and even the subcontractors are taken into account.

Construction Should be Exciting

If you’re a contractor or owner looking to build a new structure or remodel an existing one, builder’s risk insurance can protect your assets. If you have any questions regarding builder’s risk insurance of other accounting matters you face, contact Maxwell Locke & Ritter today!

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