There are various types of policies for builders, including the general contractor’s policy. A builders risk policy will protect the home owner against bodily injury and property damage. However, a policy will not cover earthquake, flood, acts of terrorism, or employee theft. It will also not cover wear and tear or mechanical breakdowns. The cost of a builders risk policy may be as much as 4% of the budgeted construction costs. The amount of coverage depends on the size of the home and the materials used.
Homeowners insurance, also known as “course of construction” insurance, is not sufficient to protect a home under construction. Most home policies will only cover finished homes; a newly-poured foundation might be damaged by a storm. Furthermore, a well-lit occupied house is not as attractive to burglars and thieves as a dark construction site. In such a case, it’s wise to purchase builders risk insurance for the unoccupied property.
While most reputable contractors carry liability insurance and workmen’s compensation, this isn’t enough to protect your home. Besides, your homeowners’ policy does not cover the damages caused to passerbys. If you’re a general contractor, it will be advisable for you to buy builders risk insurance as an additional cover for your property. If you’re building a high-value home, you may need builders risk insurance.
Another important reason for a homeowners’ builders risk insurance is to cover the unoccupied part of a home. The risk of theft is higher for unoccupied property, such as a newly-poured foundation. If a large storm hits the area, the foundation could be ruined. Similarly, an inhabited home is not attractive to thieves, while an unoccupied home is dark and unprotected. A builder’s risk policy protects the property before it is inhabited.
While homeowners’ liability insurance protects the home, builders’ risk insurance covers the entire property while it’s being constructed. It’s essential to consider the risks when it comes to construction projects. For example, an unoccupied property is not as protected as a finished structure, and the structural risks are not the same. It can also be more appealing for thieves if it’s well-lit. A builder’s risk policy is crucial to protect the property.
Unlike a standard homeowners’ policy, builders’ risk insurance protects the home while it’s being built. It covers damages and injuries to workers and the materials used during the process of home construction. It also covers the loss of data or documents in transit. It protects the homeowner against unexpected costs, which could cause the project to be delayed. It can also include any soft costs, including the lost property value or the cost of a new kitchen.