Builders risk insurance (aka course of construction insurance) is designed to protect your construction project from a wide range of accidents, so by nature its coverage is very broad. How broad? If you’re wondering what’s covered by a builders risk policy, it may be easier to ask who and what it doesn’t cover than what it does.
Builders Risk will protect a home you’re building or remodeling and the tools associated with that project from incidents such as:
The list above includes just a few examples of the policy’s coverage. Your policy will be designed specifically to fit your construction project and the risks it faces.
Now that you know a bit more about what your course of construction policy covers, it’s time to discuss the key people who should be covered, too.
The Four Parties Your Builders Risk Insurance Needs To Cover
Because builders risk insurance covers such a broad range of events, it’s important to make sure that all parties with an investment in the project are listed as insureds in your policy. Make sure these key players aren’t left out of your insurance coverage.
The General Contractor
The general contractor should be the first name you look for on the insurance policy under “insureds”. As the general contractor, you’re the one overseeing the project, and your construction business is getting the job done, so you’re one of the parties at the greatest risk for loss should an accident occur. A builders risk policy is written with your interests in mind, which means it will probably cover both the property and the equipment associated with the project.
The general contractor is one of the two parties who may be purchasing the policy and paying for deductibles that arise.
The Property Owner or Developer
If the general contractor isn’t the one to purchase the project’s course of construction insurance, then the property owner will do it. The property owner has a vested interest in making sure the project they’re paying for goes off without a hitch, and is at risk for financial loss if something goes wrong. If the contractor isn’t adequately insured, then the prices of any damages incurred may fall to the property owner.
If any subcontractors are working on this project, it’s important that they be listed on the policy too. You may need to delegate certain tasks that you and your employees cannot or are not qualified to perform to subcontractors. Your subs could include parties such as a third-party roofing company, or a third-party plumber. Accidents can happen involving the elements of the job they’re responsible for. For example, if a flood or fire ruins the roofing material for the project, you’ll need your builders risk policy to cover your subcontractor’s supplies as well as your own.
If there was a loan issued for your construction project, consider including the bank that issued it on your course of construction policy as an insured party. In this case, because the bank has loaned you money for the project, they are at risk of a loss if something goes wrong. The financial institution should be listed in the policy as a mortgagee, and covered under a mortgagee provision or designation of mortgagee.
Who Should Be Left Out?
While any party with a financial interest in the construction project should be included under the policy, there are parties without insurable interest who are typically left out. A party without insurable interest is one who doesn’t benefit financially from the continued existence of the property in question, for example, a party who has been paid up front. These parties may include suppliers of materials, or architects.
Builders risk insurance is designed to protect a construction project, and all parties invested in it, from financial loss because of an accident. It’s important that anyone at risk of losing money should the worst happen be covered under your course of construction policy. Accidents can happen to anyone, so make sure your construction project is protected from an accident that’s out of your control.