How to File a Builders Risk Insurance Claim

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As a contractor, you know that unexpected incidents like fires, theft, and flooding are hazards of the job. However, an accident like this on a construction site can bring major losses and set your project back weeks … or even months. Worse, all of this could take a serious financial toll.

When damage is incurred on a construction site, your builders risk insurance can help offset the costs and get you back on your feet.

Make sure you know how to file a builders risk claim properly you so that you can get back to work as quickly as possible if an accident happens on your project site.

Everything You Need to Know to File a Builders Risk Insurance Claim

Before you file a builders risk claim, make sure your policy will cover the incident in question. The best way to do this is to review your policy thoroughly. If you’re not sure if the incident in question is covered or not, contact your agent to check.

Take Detailed Notes

When you file your claim, you’ll need to give a detailed description of the incident. Taking notes will help you remember the accident accurately when you’re reporting it.

Make sure you take note of everything you’ll need to know to file your claim, such as:

  • The time and date of the incident
  • Where the incident occurred
  • The names of the parties involved
  • If any witnesses observed the event

Taking photographs or a video of the damage will help you give your insurance company a more detailed idea of what happened. Take photographs from several angles.

Keep copies of your photographs and notes as evidence.

Get Witness Statements

If there were any witnesses to the incident, have them give you a written statement on what happened. Make sure the statements are detailed, and have each witness sign their statement.

Determine Damage Costs

Your builders risk policy provides coverage for the cost to replace damaged property. It can also help pay for damage done to the property itself.

Make a list of the materials and equipment that will need to be replaced or repaired because of the damage. Calculate the costs of these items and any property damages. Your insurance company will compare the costs of the damages to your policy to determine how much you will be compensated.

Make Sure You Have all the Info You Need

When filing a claim, your insurance company will ask you for information such as:

  • Your business’s name and contact information.
  • A detailed description of the event. Make sure you have your notes!
  • The claimant’s information. This is typically the contractor or the property owner.

Act Quickly

Initiate your claim as quickly as you can with your insurance company, it’s the best way to get the help you need. Contact your insurance professional as soon as possible after an incident occurs. At Citizens General, our experienced agents and customer support team are available to help you file your builders risk insurance claim, and answer any questions you have about the claims process.

Accidents can be frustrating and costly, but if you file your claim promptly and make sure you give your insurance agent accurate, detailed information, your builders risk insurance will help you to bounce back from the incident.

Know What Your Builders Risk Insurance Policy Covers

Are you filing the right claim? Builders Risk Insurance protects you from damages caused during construction by accidents that were out of your control, such as:

  • Fire
  • Wind
  • Theft
  • Lightning
  • Hail
  • Explosions
  • Vandalism
  • Flood
  • Earthquake

Keep in mind that there are certain things your builders risk policy may not cover, such as employee or third-party injuries, third-party property damage, or professional negligence. If you’re unsure if an incident is covered by your builders risk policy, just ask us.

Builders Risk Insurance vs Inland Marine

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Builders Risk Insurance vs Inland Marine

There are many different policies to choose from when you’re building the insurance protection that’s right for your construction business. Builders risk and inland marine are both important policies for contractors to consider, but they overlap in one key area: both provide coverage for your tools and equipment.

How should you determine which will work best for you?

What is Builders Risk Insurance?

Builders Risk Insurance, also known as course of construction insurance, protects a project from accidents while construction is being completed. This coverage includes the building materials, supplies, and equipment involved. Builders risk generally protects you from incidents such as:

  • Fire
  • Theft
  • Vandalism
  • Earthquake

Builders risk insurance is frequently written on a short-term basis, ranging from three to twelve months, but these terms can be extended if necessary. Builders risk can also cover the materials used to work on the property while they’re in transit or temporary storage, and this is where it can overlap with inland marine coverage.

What is Inland Marine Insurance?

Inland Marine Insurance covers your tools and equipment while you take them to and from a project site. In the insurance biz, we call this a floater policy. That means the coverage goes wherever you go. Inland marine covers property that is in transit and property in the control of another person, such as:

  • Materials
  • Supplies
  • Tools taken to and from a job site

Inland marine is also known as tools and equipment coverage, and it protects the power tools you transport to and from a worksite, as well as the tractor that one of your employees is using for the day. This is an essential policy for contractors who frequently work on other people’s property.

What’s with the name?

If the term “inland marine” confuses you, you’re not alone. It sounds like something you need to insure a yacht or fishing boat rather than a contractor’s tools. The term is an old one, dating back to the industrial revolution. During that era, goods that had previously been transported by ship began to be moved by train and other land-based transportation. Marine Insurance companies expanded their coverage to offer Inland Marine Insurance for goods moved on land, and the definition of the term has expanded since then to refer to a type of property insurance in transit.

Which Contractor Insurance Policy Will You Need?

The overlap between the two policies can be confusing. Both inland marine and builders risk will cover tools and other property in transit, but for different reasons. Builders risk is intended to cover short or long-term construction projects, whereas inland marine protects your tools on a day-to-day basis.

If you’re a handyman, subcontractor, artisan tradesperson, or part of a small contracting business, inland marine insurance will be an important part of your insurance package. If you only work on a project for a couple days at a time before moving on, then it’s most important that your expensive tools and equipment are insured.

However, If you are a general contractor or project owner, you may need builders risk insurance for the individual projects you work on. In this case, the insurance is protecting the construction project itself and the tools associated with it by extension.

Keep in mind that some builders risk policies only cover damages done to the property itself, and may not cover your tools. Read through your builders risk policy carefully- if it doesn’t cover your equipment, you may need both types of coverage.

While builders risk insurance and inland marine insurance may overlap to cover your tools and equipment, they cover your equipment for different reasons. Builders risk protects your equipment only as part of a particular project site. Inland marine is intended to insure the equipment itself as you take it to and from project sites on a daily basis. If you’re not sure which one will work best for your business, let one of our experienced construction insurance professionals help you decide.

7 Things Not Covered by Your Builders Risk Insurance

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When you’re breaking ground on a new construction project, you know that your builders risk insurance has your back. They don’t call it “all-risk” coverage for nothing… there’s a pretty good chance your policy can cover almost any accident that may arise while you’re working on your project.

A windstorm causes the project to collapse? Covered.

A fire from the neighboring property spreads to your construction site? Covered.

Some kids sneak in and steal your tools? Covered.

However, just because this policy is broad doesn’t mean it covers absolutely everything. Every insurance policy has limits. It’s important to be familiar with the specifics of your builders risk coverage, and to know what is and isn’t covered.

7 Things Not Covered by Your Builders Risk Insurance

Your builders risk policy may cover a lot, but you may be surprised to learn the following things may still leave you exposed.

#1: Your Tools and Equipment

We know what you’re thinking- didn’t we just say that builders risk insurance covers your tools?

Well, they may or may not be covered. It’s important to know how your tools are protected under this policy so you know what gaps you might have in your coverage.

Every builders risk insurance policy is different. Tools and equipment are one exception that can vary enormously from policy to policy. Most builders risk policies cover your tools and equipment while they’re on the job site or in transit.

However, some policies might not include expensive equipment such as bulldozers or ditch diggers. Others might not cover tools and equipment at all. Furthermore, while your equipment may be covered, the equipment belonging to your subcontractors might not be.

Read through your policy carefully so you know which of your equipment is covered. If your tools aren’t covered, you may need to add an additional equipment floater to your coverage, such as inland marine insurance.

#2: Flawed Workmanship

Builders risk insurance is designed to cover accidents.

But what happens if an accident on the project site is your fault? Depending on your policy, if you or one of the other insured parties are found to be at-fault for an incident, builders risk might not cover it.

Picture this:

You come to work one morning to find that an entire section of the home you were constructing has collapsed. Upon further inspection, it turns out that there was a miscalculation. The support beams you were using weren’t strong enough to support that kind of weight.

While most builders risk policies cover incidents such as collapse when they’re accidental, this collapse would be due to a design error. And there’s a chance your policy may not cover it.

In the event of claims related to faulty workmanship, it’s important to know what your contractor insurance policies cover, and what they don’t. If your builders risk policy includes a faulty workmanship exclusion, you may need additional insurance coverage to protect you from this specific risk.

For many contractors, the best answer to this situation is adding a Faulty Workmanship endorsement to your general liability policy to cover third-party property damage arising from your work.

#3: Employee Theft

Employee theft is another frequent exception to builders risk policies. Most builders risk policies cover incidents such as theft and vandalism. However, it’s important to remember that your policy typically only protects you if the theft or vandalism is caused by a third party.

Imagine this:

You’ve hired a new guy, and while you don’t know him well, he does good work. As time wears on, however, things start to go missing. Hammers, building materials, maybe an expensive power saw. You suspect he might have something to do with it, but your insurance covers theft, right?

Not always.

If you, one of your employees, or another party insured under your policy is the source of the loss, your insurance policy may not be able to cover it.

The best way to prevent loss due to employee theft or vandalism is to make sure you only hire qualified employees and subcontractors, and run background checks on the people you hire.

#4:Your Vehicle

While your builders risk insurance may cover your tools and equipment while they’re in transit, it probably won’t cover your work vehicle.

If one of your employees gets in an accident on the way to the job site while driving a company vehicle, or you accidentally back your work truck into a concrete support beam and dent it, you’ll need additional coverage to make sure you don’t suffer a financial loss.

Don’t forget to add a commercial auto policy to your contractor insurance.

#5: Soft Costs

When you purchase your builders risk insurance, you’ll want to read through your policy carefully to see if soft costs are included.

A soft cost is money you lose during the time it takes to move forward with your project after an accident. Soft costs may include:

  • Insurance premiums
  • Legal fees
  • Construction loan interest
  • Equipment rentals

Some policies will include soft costs, and some might not. If you discover that your builders risk insurance doesn’t cover soft costs, consult with your insurance agent about adding supplemental coverage.

#6: Earthquakes and Flooding

Builders risk insurance is designed to protect your project from accidents that are out of your control. This includes third-party damage and natural damage from disasters such as:

  • Fire
  • Lightning
  • Windstorms

However, it doesn’t always cover every disaster. Earthquakes and floods are frequently listed as exceptions on most builders risk policies.

If you know you’re working in an area where you have a high risk of a particular type of disaster, you may need to add supplemental coverage to your builders risk policy to cover it. If you work in San Francisco, earthquake coverage is a must. If you’re in a floodplain, you need flood insurance.

Read through your policy, and if these disasters aren’t included, ask your insurance company about adding supplemental earthquake or flood insurance to your policy.

#7: Nuclear Accidents

Finally, extreme man-made events are frequently listed as exceptions on builders risk policies.

This includes incidents such as:

  • Nuclear accidents
  • Acts of war
  • Acts of terror

The damage caused from these events is frequently very expensive, so your insurance company may not be able to cover it.

If you are working on a high-profile construction project and have reason to believe that these events may be risks for your project, look into specialized insurance to supplement your coverage.

Every insurance policy is different. It’s important to read through yours, especially the exceptions, to make sure you understand which risks are covered and which aren’t.

If an accident happens that your policy doesn’t cover, the costs can add up quickly. Reading through your policy carefully before you buy it, and making sure you have any supplemental coverage you might need, is the best way to make sure you’re adequately insured.

Who Should Be Included on a Builders Risk Insurance Policy?

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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:

  • Lightning
  • Theft
  • Explosions
  • Fire

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.

The Subcontractors

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.

The Bank

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.

Does Your Builders Risk Insurance Cover Your Subs?

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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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What Isn’t Covered in a Builders Risk Insurance Policy?

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Builders risk insurance protects a construction project from a wide variety of accidents, including fire and vandalism. Because this policy covers such a large range of incidents and parties, it’s an invaluable part of your construction insurance. However, it’s important to be aware of what builders risk insurance doesn’t cover, so that you know where you may need to fill in the gaps in your coverage with other policies.

5 Incidents Your Builders Risk Insurance Won’t Cover

Even though your builders risk policy may be written as “all-risk,” don’t fall into the trap of thinking your coverage is bullet-proof. Every insurance policy will have some coverage exceptions in place.

Here are five scenarios where you may not be protected by your builders risk policy:

#1: Overlapping Liability Coverage

While your builders risk policy might overlap with your liability insurance in certain areas, your builders risk insurance typically won’t cover liability issues that could be covered by other policies. For example, your policy may not cover an accident if the insurance company determines that the incident was caused by negligence by you or another insured party. In that case, you may need general liability insurance instead.

#2: Faulty Workmanship

This includes faulty design and materials as well as faulty workmanship. Builders risk insurance only covers certain accidents, and faulty workmanship typically isn’t covered under this policy. This type of damage is often the result of a professional error, not an accident. Read your builders risk insurance policy carefully, and don’t be surprised if it includes a specific exclusion for faulty workmanship.

Luckily, you don’t need to be completely exposed to faulty workmanship risks. Citizens General offers a Faulty Workmanship endorsement for contractor general liability policies which extends up to $10,000 worth of coverage if you make a mistake. Contact us to learn more.

#3: Intentional Damage

While builders risk insurance may cover acts of vandalism, this only applies to damage done by third-parties. If you or any of the other insured parties covered under your policy intentionally damage the property or your materials and equipment, the insurance company will not cover the loss. Make sure you, your employees, and your subcontractors conduct themselves professionally to avoid having to pay for intentional damages.

#4: Wear and Tear

Builders risk insurance is intended to protect you from damages that occur on a construction project during the course of construction. Natural wear and tear on project supplies or equipment is typically the result of long-term weathering and use rather than a specific occurrence, and this is outside the coverage of a builders risk policy. It’s important to invest in regular maintenance of your tools and invest in quality supplies.

#5: Extreme Events

Your builders risk coverage may exclude certain extreme natural incidents such as floods or earthquakes- be sure to read through the policy before purchasing if you think your project is at risk of either of these events. If you are working on a project in a flood zone or along a fault line, your insurance carrier may offer supplemental coverage in the form of flood or earthquake insurance.

Additionally, there are certain extreme events that may be caused by a third-party that your builders risk insurance may not be able to cover. This can include nuclear risks, acts of terrorism, and acts of war.

Builders risk insurance is important coverage for any construction project. However, make sure it’s not the only insurance policy you’re relying on. While builders risk provides invaluable protection against accidents, it can’t always cover extreme accidents or events where one of the insured parties is at fault. Make sure you have a comprehensive insurance bundle to keep your company safe.

11 (More) Must-Know Facts About Builders Risk Insurance, Part 2

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Builders risk insurance is a wise investment for contractors jumping into new projects. Also called course of construction insurance, this broad policy covers your new project from a broad range of accidents. This can include everything from fire and flood to theft and vandalism.

We’ve already set you up for success with 11 Must-Know Facts About Builders Risk Insurance, but we want to let you in on even more awesome info about this can’t-miss policy.

Discover what your policy should cover, what factors impact your premiums, and more.

Ready to learn (even more) about builders risk?

11 (More) Must-Know Facts About Builders Risk Insurance

  1. If you’re a general contractor or a property owner/developer, then you’re typically the one responsible for purchasing builders risk insurance for the construction projects you’re responsible for. If you are a subcontractor, you are generally included as a “named insured” on the builders risk policy which the general contractor took out.
  2. Builders risk insurance does not cover buildings you’re doing small repairs on. It’s intended to insure residential or commercial buildings that are being constructed or having major remodels done.
  3. Coverage for earthquakes and floods is commonly excluded from most builders risk policies, but that doesn’t mean you can’t add it. Earthquake and flood coverage is generally available as an endorsement or separate policy if your project needs this protection.
  4. What do you do if a wind storm hits your construction project and the entire frame caves in? Luckily, most builders risk policies generally cover collapse. (Read your policy carefully though- there may be exceptions if the collapse is due to design errors or faulty workmanship if your policy contains a faulty workmanship exclusion.)
  5. You can add coverage for soft costs to your policy. By opting for this additional coverage, you can protect your project not only from the direct financial loss of supplies and property but from less tangible losses as well. Soft costs typically include losses incurred from project delay, such as extended equipment rentals.
  6. According to the IRMI (International Risk Management Institute), most policy limits are determined by the estimated completed value of your project. Be sure your estimate includes overhead and profit, as well as the value of all covered property such as materials and supplies.
  7. If any of the parties listed on the policy has filed bankruptcy in the last 10 years, the price of your course of construction coverage could go up. And that’s not all: your claims history can play a big role in your policy pricing, too.
  8. The materials you’re using in your project may impact policy costs- for example, using a wooden frame instead of the more conventional steel could increase your premiums.
  9. The location of your project may impact the price of your coverage. Your course of construction policy may be cheaper if you’re not building in Tornado Alley or along a fault line, for example.
  10. Most builders risk policies are “all-risk” policies. This means that, unless an accident is specifically excluded from the policy, most are covered. With the exception of specific exclusions, these policies offer protection against a broad range of risks.
  11. Builders risk insurance may not protect you from certain incidents that don’t qualify as accidents, such as faulty workmanship while you’re working on a project. Read your policy carefully and understand the exclusions it contains. You may need additional insurance protection to cover you against faulty workmanship risks.

Builders risk insurance protects you in case the worst happens while you’re working on a project. Accidents can get expensive fast. As efficient as you and your team are, a fire or flood on a construction site could hurt your company financially and set your project back weeks or even months. That’s why it’s important to make sure that your project has a course of construction policy written by a specialized insurance company that understands the risks your contracting company faces.

Like what you saw? Don’t forget to check out our first post in the series: 11 Must Know Facts About Builders Risk Insurance. And leave us a comment if we’ve left anything out!

11 Must-Know Facts about Builders Risk Insurance

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What’s the first thing you do before getting started on a project? If you are a shrewd contractor, you start thinking about how to make the most profit and eliminate the risk of losing money. And the best way to keep your project profitable is with a specialized insurance policy: Builders risk.

Here are 11 things you should know about builders risk insurance:

  1. Builders risk is another name for course of construction insurance, because that’s when it covers your project and assets: during the course of construction.
  2. This is a specialized form of property insurance that covers a building or structure under construction, or a remodel project (when most homeowners policies will not.)
  3. The material and supplies that you need to finish your project are included in this coverage. You don’t have to worry about paying out of pocket to replace materials if they are damaged by a fire, flood, or high winds.
  4. Vandalism and theft are included in course of construction coverage, so you don’t have to “pay the fine for someone else’s crime.”
  5. Course of construction can cover demolition expenses, and the cost to clear debris if your project is hit by an earthquake or other natural disaster. Clean-up and salvage costs won’t eat away at your profits.
  6. Lightning hits the neighbor’s house and a fire spreads to your project site? Covered.
  7. Your project buildings and structures aren’t the only ones covered; temporary structures are, too. Don’t worry about damage to your scaffolding or construction forms.
  8. Blueprints, site plans, and even temporary papers are covered with a course of construction policy.
  9. This friendly policy can include the owner, general contractor, and subcontractors as “named insureds,” which can eliminate finger pointing and responsibility for loss, delays, and damages payment in the event it is needed.
  10. You can get a policy for the time it takes to complete your project: three-months, six-months, or 12-months. You can even extend the period if your project takes longer.
  11. It’s easier to ask what’s not covered in your policy than what is. This broad-insurance coverage protects you from almost everything short of fraud, intentional acts, or specific inclusions.

5 More Bonus Facts!

We’ve updated this popular post with even more facts and info about your builders risk policy.

Bonus Fact #1

You can factor overhead and profits into your completed value estimate. These values are commonly figured at about 10% each. Your policy may specifically mention overhead and profits as being covered, but even if they aren’t mentioned be sure to add these costs in. Overhead and profits can sometimes total up to 20% of a project’s loss!

Bonus Fact #2

Some of your equipment may not be covered by your builders risk policy unless an equipment floater is included. Bulldozers and ditch diggers, for example, generally need a floater to be covered.

Bonus Fact #3

There is no equivalent policy to a builders risk policy. Your general liability and/ or commercial property insurance can’t substitute for the specialized coverage that a course of construction policy provides.

Bonus Fact #4

“It’s never too late” is a myth – at least when it comes to builders risk. You can’t get this coverage once a project has started, it needs to be obtained before work begins. When it comes to builders risk insurance you need to get it early if you want it at all. In other words, “the early bird gets the builders risk coverage.”

Bonus Fact #5:

Change orders change your policy. As changes are required on your project by architects or the owner, the costs of your project will also change. Some builders risk policies include “escalation clauses” that increase your coverage limits and premiums if change orders increase the total project costs. Others will require you to inform the insurer of changes to the project costs.

So much can go wrong while you are in the middle of a project. There is no way to know when winds will send a tree crashing through your site, if a sudden rainstorm will flood your project and ruin your materials, or if mischievous kids will spray-paint your project in the middle of the night.

Course of construction coverage keeps you on track to finish your project without having to pay out of pocket to clean up, replace, or repair the damage from a completely unexpected event.

Starting a job without this coverage is like walking away from a paycheck. It just doesn’t make sense.

Want to know even more about builders risk insurance? Check out part 2 of our series:
11 (More) Must-Know Facts About Builders Risk Insurance

Am I Eligible for Builders Risk Insurance?

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You know the benefits of having builders risk coverage in place to defend your project. You want to protect the structure, your materials and supplies, and your machinery and equipment during the course of construction. And if something goes wrong, you want to get back on track fast without taking a major financial loss. Not every project (or contractor) may be eligible for coverage, however. If you are wondering which factors may limit your coverage options, keep reading.

Let’s take a look at some of the eligibility requirements you may need to meet in order to get builders risk insurance.

Your Claims History

Have you had builders risk claims in the past? If so, don’t panic. A previous claim won’t necessarily exclude you from getting a new policy for your upcoming project. However, if you’ve had multiple claims in a short amount of time, like more than 3 builders risk claims in the past 3 years, you may have fewer options available, or may face higher premiums for your coverage.

Your loss ratio is another factor which may affect your ability to get coverage. A loss ratio is the amount that an insurance provider has paid out in claims divided by the amount they’ve collected from you in premiums. In other words, if you have paid $100 in insurance premiums, but your insurance company has paid out $50 in claims on your policy, you have a loss ratio of 50%.

Even if you have only had one or two claims in recent years, but they were high value claims, the result to your loss ratio could affect the insurance program options available to you. Generally, a loss ratio of more than 50% over the prior 3 years could limit the policy programs available to you, or lead to higher premiums.

Current Perils

Are you trying to get coverage for a project that is across the street from an blazing wildfire? While builders risk insurance typically covers fire damage, it may be hard to get insurance if your project is within 50 miles of an active fire. Your best course of action is to protect your project with adequate insurance coverage before the fire (or other disaster) strikes.

Of course, it’s hard to predict when an unexpected event will occur (which is why you use contractor insurance in the first place). If a flash flood, fire, or other event has suddenly occurred, you may still be able to get coverage for your project. Your contractor insurance provider can tell you if you are safely out of reach of that particular peril, or what other options coverage options you may want to consider.

Previous Damage

If you are taking on a remodel project where the structure was damaged as a result of a flood, fire, or earth movement, that project may not be eligible for coverage. That’s not to say that you shouldn’t take on a project to remodel and repair after a kitchen fire destroyed part of a home. There may be situations where you can get adequate insurance for a project involving prior property damage. However, it’s best to talk with your insurance provider to see if that particular project is eligible for coverage before you begin.

Your Experience

Are you a brand new contractor, working on your very first project? Protecting the project during the course of construction is a smart move that can preserve your assets and investment. But you may have fewer options for business risk coverage compared to a contractor with more years in the business. Contractors who have been in business as a homebuilder or remodeler for less than 2 years may not be eligible for some insurance programs. That doesn’t mean you can’t get covered, but it may give you fewer options for coverage, or come at a higher premium price.

Additional Eligibility Factors:

The factors mentioned above are some, but not all, of the things considered when you apply for builders risk coverage. Other eligibility factors are also taken into consideration when determining which program best fits your need, and what your builders risk costs may be. These include:

  • Type of project (residential vs commercial)
  • Project value
  • New construction vs remodel
  • Fire protection class code (a rating of the fire protection system, which includes fire department quality and available water supply, of cities and towns.)

Are There Exceptions?

Every insurance program has different eligibility guidelines. If you fall short of meeting a guideline, it doesn’t necessarily mean you can’t cover your project. Talk to your insurance provider to find out what your options are. You may be able to get an underwriting exception or have options available to you that you never considered.

Protecting your projects with builders risk coverage provides you a safety net in the event something goes wrong during construction. If a fire breaks out on site, a vehicle plows through the side of the building, or a roof collapses — builders risk is there to get you back on your feet quickly and without facing a huge financial loss. Talk to your insurance provider for more details about the eligibility requirements, to get a quote on your upcoming project, or for additional information about the policy coverage and limits.

Builders Risk vs General Liability for Workplace Damage Claims

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When something goes wrong on a project, your contractor insurance protection can help shield you from severe financial losses. But if you are covered under both a builders risk policy and a general liability policy, you may be unsure which one foots the bill for an accident or mishap, particularly if you are at fault.

Let’s say you are operating a crane, which you accidentally swing into a support column. The result? A collapsed roof on an already completed building.

You have general liability coverage, and you are included as a subcontractor on the builders risk policy taken out by the project owner. So which policy is best for covering workplace damage?

The choice is not always clear.

Builders Risk vs General Liability: Which Do You Choose for Workplace Damage?

Let’s look at both policies to better understand the best course of action when you are responsible for the loss.

The Coverage: General Liability

Your contractor general liability policy (CGL) is designed to cover damage that you cause to third-parties. That includes:

  • Property damage
  • Bodily Injury
  • Personal Injury

In this case, you are definitely the cause of the damage, and the property belongs to someone else. So it could be easy to see why you may immediately think you should bring this claim against your CGL policy. You can call up your insurance company, file a claim, and hopefully the project owner will forget the whole thing ever happened. After all, you aren’t going through his policy, so he won’t have to pay a dime for your mishap.

Before you file a claim against your CGL, however, you may want to consider what it doesn’t generally cover.

Common Exclusions to a CGL Policy:

What your CGL policy doesn’t cover is almost as important as what it does. The following exclusions are commonly found in a CGL policy:

  • Your product: property damage to your own products (not real property) which may include your materials and supplies.
  • Own property: property damage to property you own, property on which you are performing operations, or any property which needs to be repaired or replaced during the course of your work if you’ve performed it incorrectly.
  • Your work: property damage to your completed work.

Contractor general liability is meant to cover damage to other persons or property that is caused by you (or your work). But that doesn’t necessarily make it the best policy for contractor’s workplace damage claims. Which is why builders risk policies are available during construction.

The Coverage: Builders Risk

Builders risk provides coverage for direct physical loss or damage to a structure or project during construction. Builders risk insurance covers all property on a project during construction, installation or repair, including:

  • Building or structure
  • Temporary forms such as scaffolding
  • Fixtures, materials, and supplies intended to become a part of the building
  • Machinery, tools, and equipment used to service the building

Generally, a standard commercial construction contract will put the responsibility for obtaining the builders risk coverage on the project owner, developer, or general contractor. The builders risk policy then covers all of the above, plus all levels of subcontractors on the project. A builders risk policy is generally obtained for the duration of the construction project, with coverage ending when the project is complete.

Common exclusions of a builders risk policy may include:

  • Faulty workmanship, design, or materials
  • Wear and tear
  • Extreme weather events

Many builders risk policies are written on an all-peril basis, which means anything not specifically excluded is covered. And that includes your accident with the cement truck. Which means your claim would be covered by the project owner’s builders risk policy.

So which do you choose?

Many times, contractors who want to maintain a good working relationship with a project owner may be reluctant want to file a claim against the owner’s builders risk policy, and prefer to submit a claims under their own CGL policy, instead.

Here’s why that may not work out in your favor.

General Liability May Not Pay

Your general liability may not pay out if a builders risk policy is in place. Your CGL policy may have an “other insurance” clause in place that states the policy will only respond in excess of more specific coverage in place, including builders risk. In this situation, two things would have to occur for your general liability policy to pay out

  • You would have to be found negligent for the incident.
  • The loss would have to exceed the builders risk limits.

A General Liability Claim May Cost You More in the Long Run

Builders risk policies are generally project specific, so a loss will stay with that policy. But if you file a claim against your general liability, it may impact your loss ratio and premiums for future years. The more claims you file against your personal CGL policy, the higher the cost of your insurance may be as you continue to grow your business.

Best Practices for Choosing Between Builders Risk vs General Liability

  • Read and understand both policies, including exclusions. If you aren’t sure what is or what isn’t covered in your policy, ask your insurance provider for clarification.
  • When damage or injury occurs, notify the project owner and all other impacted contractors immediately. This can help you maintain a professional relationship with the project owner.
  • Contact your insurance provider promptly, and give notice under both the Builders risk and your CGL policy. The insurer will investigate the claim and help you understand your options.

Typically, it is beneficial for the subcontractor to file a claim against the project’s builders risk policy. But for the project owner, it is more beneficial if you file against your own CGL policy. Only you can decide if increased premiums and taking the loss against your CGL is worth maintaining a good working relationship with the project owner. Before you make that decision, make sure you understand the details of each policy, and contact your insurance provider to help you make this decision.

When you have two policies with overlapping coverage, the decision isn’t always clear which one gets the claim. Compared with the high cost of facing a loss without coverage, however, it’s kind of a good problem to have.