Builders risk insurance is a type of builders insurance that most construction and renovation projects require to protect the interest of all those invested throughout the construction project. There are some cases when building risks or exposures would be more effectively covered under different policy types. For a builders insurance group to determine which type of policy most appropriately covers a project against exposure, it is essential to look at some details about the project and the actual risks.
Who Has Insurable Interest?
Determining the best builders insurance policy under which to cover a construction project involves identifying all parties with an insurable interest in the project. It may be the owner of the building, the general contractor, subcontractors, or anyone else who may suffer a financial loss due to various risks. Some parties, such as the project owner, may have an ongoing exposure to risks, while others like subcontractors may have only partial exposure. Exposure may be in the form of financing of the whole project or in payments made to contractors and how funds are spent to allow the project to be built.
What Policies Can Cover Construction Exposure?
Taking all those with an insurable interest into account, a number of policies can be purchased from a builders insurance group to protect all parties depending on details about the project itself:
- Builders Risk Insurance for New Construction - Best for new construction, this policy provides the widest coverage where the project owner does not have a commercial policy to cover other buildings to which the new building can be added. There is also the option of having the general contractor purchase the builders risk policy; however, that requires careful examination since project owners face exposure to more than just the cost of the physical structure itself. In either case, the party obtaining the policy will be listed as the primary holder and everything from deductibles to coverage terms must be discussed. A general contractor may have an easier time securing this type of builders insurance; however, it may be more beneficial for the project owner to get one if possible.
- Commercial Property Insurance for New Construction - When the project owner already owns commercial property, there is sometimes possible to add a new project to that policy and other personal policies if the project fits certain specifications. It is not uncommon for a commercial insurer to provide a degree of risk coverage like a builders insurance group. In this case, the owner remains the primary investor named in the policies and coverage for different risks must be individually addressed and added as necessary using floaters and other riders.
- Insurance for Commercial Renovation Projects – Renovation is not usually considered a new construction project. Since renovation projects are done on existing buildings that already have their own commercial coverage, project owners usually have their coverage expanded as necessary so their exposure is protected. The current policy is analyzed and installation floaters and riders are added that expand coverage as required to protect the investment as well as any other risks the owner may face.
Every construction project requires some type of builders insurance to protect the interests of those invested in the project. Not every project requires a builders risk policy. Depending on whether the project involves new construction or renovation, the parties involved in the project, and whether the project owner already holds some commercial property insurance, it may be more effective to cover these projects with a different type of policy. To choose the best and most effective one, the owner of a building or renovation project should discuss the construction with a builders insurance group that can help them decide what type of coverage will be best.