Sometimes the difference between a contractor who can successfully grow a profitable company and one whose business flounders is a little bit of know-how. A savvy contractor knows how to handle the risks associated with a project, and how to protect himself with the right insurance policies. Profitable contractors know a thing or two about builders risk insurance, and how to get the most out of their policy.
Builders Risk is Better for Bids
Who is responsible for the policy, the owner or general contractor? Without knowing who will be supplying the insurance coverage, it’s almost impossible to provide an accurate bid. If the contractor is supplying the coverage, is he also paying the premiums, retaining the deductibles, and handling claims?
An experienced contractor knows that these important discussions need to happen in pre-bid meetings, and clarifications need to be provided in bid documents in order to remove uncertainty from the bid process.
“Master” the Owner-provided Policy
In the event that an owner is providing the policy, a contractor who wants to protect his business assets will need to take some additional steps, such as obtaining a copy of the owner’s policy.
You want to make sure you, and any of your subcontractors, are named insureds on their course of construction policy. Review the deductible amounts, and always make sure that the policy is in effect before you or any of your subs set foot on the project site.
Some contractors prefer to secure “master” policies to protect themselves from losses due to an owner-provided policy. By carrying a master policy, you are able to offer a ready-made builders risk policy to owners.
If the owner refuses and chooses to get their own policy, you can use your policy to fill in the gaps of the owner-provided policy if necessary.
Don’t forget to consider Soft Costs
A course of construction policy protects your project from the unintended consequences of unforeseen events. But did you know that it can also protect you from some not-so-obvious losses, such as business interruption losses and soft costs?
Delays in construction might cost you overtime wages to employees, additional interest on project-related financing, or added rental fees for equipment that is not being used during repairs. These “soft costs” can be insured, but they are not always included in a standard policy. Adding a soft cost endorsement to your policy to provide extra protection to your business.
Remember: One size does not fit all
Different projects will require different course of construction coverage. Don’t fall into the trap of thinking that one policy is a good fit for every project you take on. A renovation project, for example, should have builders risk coverage for both the replacement cost of coverage of the existing structure and the new construction. For new construction, your policy should cover site preparations, excavations, foundations, underground pipes, scaffolding, construction forms, and temporary structures that would be expensive to replace if something unexpected occurred.
The key to running a successful, profitable construction company is protecting yourself from the risk of big losses from unforeseeable events. Many contractors may utilize builders risk insurance to protect themselves, but the most successful contractors will know how to take this coverage and maximize it to fully protect the business they’ve worked so hard to build.