Working on an existing building requires extra care, to avoid damaging anything that is already there or may be brought onto the property. Insurance is key to keeping everything in the project moving smoothly, even when you literally hit an obstacle. With these tips, you can inform your clients about the practical uses of builder’s risk insurance, and whether or not they should get it for their construction or renovation projects.
What Is Builder’s Risk Insurance?
Every time a property owner takes on a construction project, there’s a degree of risk. Add in people on the jobsite, equipment, materials, and you have a situation that requires an extra degree of protection. At times, accidents happen. Earthquakes cause massive destruction. As a contractor, your goal is to protect your bottom line and make sure that your client can handle any financial burdens that are presented to them, expected and unexpected. The best way to achieve this is to secure coverage (usually within different policies) for you, your employees and subcontractors, your equipment, materials, and the property where the work is taking place. Builder’s risk insurance provides insurance not just for the property, but for the materials and the products of the construction itself, until the project is complete.
Does Homeowners Insurance Cover Renovations?
People who own a property are required by law to carry some form of insurance on it. Residential properties need homeowners insurance (and renter’s insurance for tenants). Business owners or commercial property owners should have business owner’s policies. The trouble is that all of these policies have strict limits, and some property owners do not carry enough insurance to properly protect them when something goes wrong. In some cases, a homeowners insurance policy may specifically exclude coverage for remodeling, simply because the work has not been specifically added to the coverage. Regular property insurance doesn’t usually cover damage to the contractor’s equipment or materials, either.
Can General Liability Insurance Replace Builder’s Risk Insurance?
Although you are obligated to carry general liability insurance (GLI) for your business, it’s not the same as builder’s risk insurance. GLI is designed to protect others from things that happen as a result of your business. That includes property damage and injury, but doesn’t protect you in the event that your equipment or materials get destroyed. If an equipment malfunction causes you to destroy a part of a structure that you were working on, GLI may not cover the costs to replace the equipment or rebuild the structure. By comparison, builder’s risk insurance probably would, depending on the factors that caused the accident.
Who Buys Builder’s Risk Insurance?
It’s clear that both property owners and contractors have something at stake during construction, so it’s not always obvious who should buy the policy. Experts disagree on the best source, as well. Some say that the contractor should purchase the policy and include it (or a portion of the premium) in the cost to the property owner. Others claim that since it is the owner’s property, protecting it is best done separately by them. In either case, the property owner and the contractor can make a claim.
How Should I Present Builder’s Risk Insurance to Property Owners?
For some renovations, builder’s risk insurance is a requirement to meet local building codes. So, depending on where you are working, it might just be something you have to have in order to start. You can also stress that it’s a practical choice, regardless. As a contractor, you strive to offer your clients competitive pricing for a good product or service. When remodeling or new construction is involved, adding a builder’s risk insurance policy is simply good sense, in most cases. No one wants the job to go terribly wrong, but having protection against loss or damage that actually covers the project itself is a way to relieve customer worries about the unexpected.
Persuading clients to make wise choices can sometimes be a bit complicated, even if you know it’s for their own benefit. This information helps you to explain to your customers why builder’s risk insurance is a solid decision that can protect everyone’s interests.
When it comes to landing residential projects, the magic always resides in the bid itself. Despite modern homeowners becoming more selective when it comes to construction, you can source good work if you know how to properly calculate your time, materials/labor costs, and subcontractors if needed. If you’re able to interact with people, listen to their concerns, and propose solutions that will make their lives easier, you have a leg up on your competition. Follow along with us today as we detail some tips and practices that will make your residential projects smooth and profitable.
It’s All in the Details
It is absolutely imperative that you perform a walk-through on the house long before you start anything else in the bid process. You have to get familiar with the ins and outs of the existing construction; take note of things like build materials and methods, layouts, designs, problems, previous repairs etc. This stage of the process often feels like a job interview. The homeowner will have some questions to size you up, but you should also come with key questions prepared – it will make you look engaged and competent.
Unfortunately, a lot of construction professionals will treat one-off residential projects like small jobs. They’ll use the same lazy approach time and time again, not paying attention to the specific needs and problems on behalf of the homeowner. Turn the tables and realize the homeowner will have to live with their decision on a daily basis. If you take the time to understand their pain points, speak to their desires, and deliver a bid that unites these aims with your professional expertise, you’ll be better off at the end of the day (even if you don’t win the bid). A personalized, thorough job assessment will separate you from the rest of the field, putting you ahead of the curve when it comes to handling any unforeseen problems if your bid is selected. Without the true nitty gritty details, chances are your assessment will miss the mark in terms of price and scope.
The Elephant in the Room
Cost will always be the linchpin of any residential project. Homeowners have the ability to use online calculators to estimate what their project will cost, but the truth is construction jobs end up being more complex than originally planned. It’s great to have a potential customer that’s mired in the budgeting process, but you have to use your professionalism and experience to remind them that construction is a pay now or pay later industry. There will always be a cheaper bid, but homeowners pay more in the long run to account for the corners that were previously cut to keep the costs down.
If you accurately budget for labor, materials, and time costs, you can properly bid a project in way that keeps your business profitable and meets customer needs. A low bid might raise some eyebrows on behalf of your clients, but it begins to eat into your profits if you have to involve new personnel or equipment on the job. Have an unforeseen problem or mistake blow up on the job? Chances are it will eat into your margin – consider this when bidding a project with a slim margin.
Face to Face
When it comes to submitting your bid – do it in person! Take the time to sit down with the homeowner, explaining the whys and hows of your bid. This gives you the opportunity to showcase your knowledge, answer questions about costs, and share any details or angles the homeowner might have overlooked previously. If you calmly and carefully explain why your bid is higher, an informed client will see the value in both your work and your attention to detail as a professional.
Do not mail or email your bid over to the client. If the client has the ability to read through your bid without your input, chances are certain key details will fall by the wayside. It will be too easy to judge and ranks bids by cost and the more time your client has to think you bid is expensive, your chances of being rejected increase.
Armed with the above information, you should have no problem putting together detailed bids that will win projects for you. Details, details, details…remember that no two residential projects will ever be the same! Learn more about the challenges and angles behind the bidding process today with CBC.
