Does Your Client Need Builder’s Risk Insurance?
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.
