Suppose that for many years, you have operated your business from a rented property. However, now might be the time that you relocate to a permanent location. To make sure the space meets your needs, you might decide to build an entirely new property. That’s a big investment that will require you to work with a contractor and ensure the project goes off without a hitch. For help protecting the property while it is under construction, you might need builders risk insurance. Here’s how it works for new properties under construction.
Builders risk insurance is a very critical piece of protection for construction project. If you’re the client who will eventually occupy the new building, coverage is a necessity you might need.
What is Builders Risk Insurance?
When you commission a construction project, you’ll hire contractors, approve designs and funding and oversee the construction process. However, buildings don’t just go up overnight. Construction of any type takes time. While you wait for the project to finish, you have to realize that there are risks that could derail progress. That’s why you need insurance on the venture.
The fact is, a basic property insurance policy likely won’t cover properties under construction. It doesn’t apply to the numerous unique risks that threaten properties that are not ready to occupy because they aren’t finished. Only a builders risk policy might be able to protect ongoing construction.
Think about it this way. A building under construction might not have door locks or security system to deter potential thieves. Or, because of the preponderance of exposed electrical wiring, fire risks might threaten the property in different ways than they would a finished structure. A builders risk insurance policy is more apt to cover you, in these cases.
So, if you plan to build a new commercial structure, talk to your current property insurer. They can point you in the right direction for getting a builders risk policy.
Structuring You Builders Risk Policy
If you haven’t ever owned a business property before, you’ll likely need builders risk insurance for new construction. You should have this policy in place from the moment you start the project. It might cover numerous types of claims, such as:
- Damage to structures under construction and their attacked furnishings
- Damage to materials that have not been installed on the building yet
- Equipment damaged through a covered hazard (like a fire or storm)
- Theft of materials by strangers or by someone working on the project
- Removal of debris following damage
Builders risk policies also fall under the greater umbrella of inland marine insurance. Therefore, it will cover items not only on the construction site, but also in transit to the site on a vehicle. In many cases, damage to any number of construction assets—from tools to safety gear, scaffolding and even blueprints—will have coverage.
Do I really need coverage?
You might think that you don’t need a policy for builders risks if you already have a property insurance policy. That’s true only to an extent. Many commercial property insurance policies don’t cover new construction unless they contain an explicit provision for new construction. If yours doesn’t, then you might need a builders risk policy.
Furthermore, you’ll often find that builders risk coverage can offer more comprehensive protection for construction. Property insurance frequently places limits on when and how much it will pay for new construction. Therefore, you might find builders’ risk insurance a much better fit for both everyday claims and worst-case claims scenarios.
When getting this coverage, work closely with your Florida insurance agent. It is often best for both the contractor and the group commissioning the project to have coverage. Your agent can point you in the right direction to get the best coverage structure.