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Does Your Builders Risk Insurance Cover Your Subs?

When you’re working on a project, you want to make sure it’s protected from a wide range of risks, from fires, theft, and even… subcontractors. After all, an unexpected event could come from anywhere and anyone. Which is why you made sure to get a builders risk policy in the first place.

What Builders Risk Insurance Does (and Doesn’t) Cover

Builders Risk Insurance covers damage to property under construction in the event of an accident, such as:

  • Fire
  • Flood
  • Theft
  • Vandalism
  • Explosions

This policy is designed to cover a single construction project, so coverage is typically offered on a short-term basis, ranging from 3 months to 12 months depending on the length of your project. It doesn’t cover pre-existing properties.

It does protect property under construction and the tools and equipment associated with that construction. In other words, a Builders Risk policy won’t cover a home you’re repairing, but it will cover one you’re building.

Because damages to construction sites can be expensive, it’s important to make sure that everyone who is financially invested in the project is covered on your builders risk policy- including your subcontractors.

How A Construction Contract Protects Your Subs

“Read your contract.” In the construction world and the insurance world, this is kind of the golden rule.

Builders risk insurance is designed to meet the insurance requirements specified in the contract for the project in question. The construction contract will specify which parties should be included in the builders risk insurance policy by listing them as “insureds” or “additional named insureds”. However, which parties are listed as insureds can vary from project to project.

Make sure the insurance requirements for your project include your subcontractors before you obtain your policy.

Keep in mind that your insurance company may not agree to cover all of the parties listed in the contract. Typical exclusions include:

  • Architects
  • Engineers
  • Material Suppliers

Because not all insurance underwriters will include all parties named in your construction contract, it’s important to understand your policy coverage before you commit to it.

Review Your Builders Risk Policy

If you already have builders risk insurance or are looking to purchase, the best way to make sure your subcontractors are covered is to review your insurance policy. No two policies are identical, so what events your policy covers and who the insureds are may vary from company to company and project to project.

A builders risk policy is typically purchased either by the general contractor or the owner/developer associated with the project. The insured parties listed in the policy should include:

  • The project owner
  • The general contractor(s)
  • The subcontractors

The project bid and contract should make clear who is responsible for obtaining the policy, and who will pay the deductibles. It’s important to make sure that all of the insureds above are listed in the policy so that everyone with an interest in the project is covered.

What To Do If Your Subs Aren’t Covered

Your builders risk policy should cover your subcontractors, and any policy worth its weight will. But what should you do if you read through your contract and policy and discover your subs aren’t listed? Make sure you contact your insurance company or underwriter and ask to have your subcontractors added as additional insureds.

It’s important that all parties with an interest in a construction project are covered by your builders risk insurance. All construction projects are unique and will have their own individual coverage needs, however. This means that no builders risk policy will be exactly like another. It’s important to read through your construction contract and your policy to make sure that you’re getting the appropriate coverage.

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