BUILDER'S RISK INSURANCE OR COURSE OF CONSTRUCTION INSURANCE - WHAT YOU NEED TO KNOW

Insurance coverage is somewhat fractured; it seems like light steel structure machine you need a different kind for each type of activity. Builder’s Risk Insurance, aka Course of Construction Insurance, is a special type of property insurance to cover buildings while they are under construction.

Wikipedia explains it this way:

Builder’s risk insurance is “Coverage that protects a person’s or organization’s insurable interest in materials, fixtures, and/or equipment being used in the construction or renovation of a building or structure should those items sustain physical loss or damage from a covered cause.”

WHO BUYS IT?
There is a good argument for the property owner to buy the builder's risk insurance; an unscrupulous contractor could abscond with funds that should have gone toward repair, replacement, or reimbursement by the owner. It depends on your reputation and relationship with your client whether this is the case.

Otherwise, the custom builder or general contractor tends to be the policy purchaser. Many times you need the proof of insurance in order to comply with local and state building codes. It may also be required as a condition of a contract.

The premiums you pay are considered fully earned premiums; once paid the money belongs to the insurer. You cannot cash out the policy or receive cash returns unless the policy is written that way.

WHO IS INSURED?
The insured persons or entities are typically the:

Owner
General contractor
Project subcontractors

Sometimes the lender is covered metal roof machine for sale if it has a financial interest in the property.

WHAT IS COMMONLY COVERED?
Most of the usual suspects are covered:

Fire
High winds
Theft
Lightning
Hail
Explosion
Vandalism
Depending on the area, flood or other natural disasters may be covered as part of the basic insurance or you may need a rider specific for the disaster. The same is true of earthquakes. It will be interesting to learn how that coverage changes in the areas new to having earthquakes, like North Texas and Oklahoma.

Some policies can even cover damage to or by vehicles and/or aircraft.

Typically the policy covers the cost to replace damaged property or may simply return the actual cash value of property to the policyholder. However, you may also be able to recover soft costs, like your time, various types of fees, and delayed opening costs, which include lost rental income or lost profits that would have been made if the property had not been damaged.

Fee recovery may include such things as architectural and engineering fees, permitting fees, and inspection fees, to name a few.

WHAT IS NOT COVERED?
Again, earthquakes may not be covered without a special rider. Employee theft on the construction site, deliberate acts of the insured that lead to loss, and losses due to fraud or misconduct are not covered; you can’t blame them for that.

Other exclusions include:

War
Government action
Ordinary wear and tear
Mechanical breakdown
Contract penalties
Voluntary parting
Some water damage, especially to property left unprotected that should have been, won’t be covered, either.

NOTE: Damage resulting from faulty design, planning, workmanship, or materials is almost never covered.

EFFECTIVE DATES OF COVERAGE
Most builder's risk insurance is scheduled to terminate when the work is completed. However, the definition of “complete” may change from project to project.

For example, complete may be understood as the closing of the sale. It may be the start of occupancy, or it could be the policy expiration date. Generally, it is whichever comes first. Since it is a legal document, sometimes there is a question about the definition of closing or occupancy, so just be aware of that.

As for when coverage should begin, the recommendation is for coverage to be effective prior to materials delivery to the jobsite. That way building supplies will be indemnified from the beginning of the project.

PURCHASING EXTENSIONS
For your own protection, you may want to consider paying for some extensions to the typical coverage, especially since the policy typically covers only the jobsite, and not even everything there.

For example, you can purchase an extension to protect materials and property during transit to the jobsite. If you want protection for your scaffolding, construction forms, or temporary structures at the jobsite, this will probably require an extension.

Extensions can be purchased to pay for other items:

Firefighting fees
Expenses to remove debris from covered property that results from a covered loss
Property in temporary storage offsite
Sewer or drain backup damage
Loss of valuable papers
Important conditions to consider

Be sure to read your policy closely to determine exactly what coverage your particular policy offers. Typically, the property of others will not be covered and subcontractors may be required to furnish their own insurance.

Tools and equipment may not be covered, only the building material. Liability is not provided and neither is coverage for accidents or injuries on the jobsite. Most of these are covered by other forms of insurance. You need to understand which policy to place a claim against for that specific loss.

Remember, as well, that coverage may end when construction is considered complete. If you have covered materials still on the jobsite once that endpoint is reached, they may not be protected any longer by builder's risk insurance.

Insurance can seem like a money pit where your premiums disappear even though the policy is not used. On top of that, a variety of insurance policies are available and you need to make certain you understand what is covered and by which policy.

With the steady increase in material costs, however, insurance is a better gamble than no insurance. Consider what it could cost your company to replace a stolen or damaged steel building frame, or all the window components that were on the jobsite during a hailstorm. Which would be a better use of your revenue?

Insurance is peace of mind for when things go very wrong. You purchase it for your own home, you are required to carry it for your automobile, and you should have life insurance if you are supporting a family.  Why wouldn’t you protect your livelihood on the jobsite?

If the owner has not purchased builder's risk insurance, you should closely consider providing it yourself. As always, consult a reputable insurance professional to learn the ins and outs of each type of coverage and your policy in particular.