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two contractors on a worksiteIf you are a contractor, you likely don't perform your services solely within the confines of your office or workshop. You probably have to travel offsite to work. Indeed, you'll probably complete the majority of your work at another premises. Still, traveling to another site does not mean that the business doesn't face operating risks. In fact, it might even face more. Therefore, you'll need to insure all of the assets and materials you take to a worksite. Let's talk about one of the most important ways to do so: by buying builder's risk insurance.

Builder's risk coverage is important for contractors, their materials and overall project success. With the right level of attention, you can specify coverage to your direct needs.

Understanding Builder's Risk

If you have business insurance, you likely have property coverage. It can help you replace business possessions damaged during covered incidents.

Nevertheless, many property insurance policies only cover assets contained within your own business property. Therefore, if you take materials out of your office or warehouse to transport to a construction site, they might have no coverage. Instead, you might need to carry builder's risk insurance to better protect those materials.

If something were to happen to your materials while off the property, they might have coverage under your builder's risk coverage. That is why it has the name it does. Builders typically take a lot of expensive assets offsite. Therefore, this coverage will pertain to those items.

Coverage might apply to:

  • Items waiting for delivery to a worksite
  • Materials in transport, for example, on a truck or in a van
  • Items delivered to the work site, and in-use.
  • Property returning to the business
It is important that you obtain enough coverage to cover the full value of items at your work site. You'll often need to expand your coverage to insure against niche risks that might prove damaging nonetheless. Therefore, work with your insurance agent to determine the appropriate type and amount of coverage for you.

When Can Builder's Risk Coverage Help

Let's say that one day, a home you are building catches on fire. It burns to the ground, and you will now have to start the project start again. That's time and money lost to your business. That's also a loss to the customer. Therefore, the funds provided by a builder's risk policy can help you replace materials, and thus get on with the work. That can help you keep clients happy, and you won't have to risk critical business funds just to do so.

Most Policies Can Cover...

All insurance policies cover different types of losses. Therefore, for you to receive a builder's risk payout, you'll likely only be able to claim certain losses.

The good news is, many materials used at contracting sites can receive coverage under a builder's risk policy. These might include:

  • Certain power tools and equipment used in the building process
  • Materials like lumber, nuts & bolts and furnishings
  • Foundations
  • Machinery
  • Some policies might also cover critical documents, like blueprints.
Policies often can pay for cleanup and debris removal services following a claim. Your policy will generally insure you against a wide range of hazards that might trigger a builder’s risk claim. These might include:
  • Storms, hail, lightning, wind and certain water damage.
  • Fire damage to materials or the construction skeleton.
  • Explosions
  • Damage from vehicles, such as if a car runs over certain items and destroys them
  • Theft of materials and vandalism
Nevertheless, there are a lot of other scenarios in which construction materials might not have coverage under your policy. Therefore, take a closer look at your policy for exclusions and non-covered items.

Check for Exclusions

Your basic builder's risk policy might not cover certain materials or damage scenarios. However, you often have a lot of opportunities to add policy extensions or riders to your coverage. Therefore, you'll be able to create a more comprehensive set of potential losses.

Keep a few of these ideas in mind:

  • Most policies don't automatically cover floods or other water damage. In other cases, they won't cover sewer backups either. For these items, you might be able to add a rider to your policy, or you might need a separate policy altogether.
  • Policies usually don't automatically cover earthquakes.
  • Occasionally, items in transport (on a truck going to the site), won't have coverage. However, riders and other coverage, like inland marine protection, can usually readily step in.
  • Sometimes, fire departments levy service charges after putting out a fire. Certain policies offer extra insurance to cover these costs.
  • Depending on the policy, certain equipment will not have coverage. Nevertheless, many policies easily let you add this extended protection.
  • Most policies will not cover items left exposed to damage. For example, if you leave an item in the rain and it gets destroyed, you won't have coverage.

When getting your builder's risk insurance, ask your agent to explicitly tell you what your policy will and will not cover. This should include both items and damage scenarios. Ask about your potential to add extra protection to your coverage.

Contact us to learn more about insurance coverage options for contractors.

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