Builder’s Risk Policy - Do You Need One?
When considering any construction project involving the building of a new home, remodeling or making renovations on an older home, most people hire contractors to perform the work for them. Because there tends to be more people involved in these projects, builder’s risk policies are necessary to ensure the safety of all parties involved with the construction of any building.
Builder’s risk policies are designed to cover the property loss associated with any type of construction project. This is due to the fact that most construction projects involve unique risks not typically covered in standard property coverage policies. Types of unique risks might include damage to structures under construction due to the environment (sun, rain, wind, etc.). The property values of projects tend to change throughout the policy period. For example, the property being used in the construction may be owned by different people (general contractors, subcontractors, or the city) throughout the different phases of construction. |
Because of these unique coverage policies, most contracts between an owner and contractor require that one or the other obtain a builder’s risk policy. Within the builder’s risk policy, all parties involved are generally covered. Because ownership of construction projects is more complicated than ownership of the actual constructed building, all of the parties involved must be covered. For example, the city might own the land that is being built on but the contractors and subcontractors own the building equipment, materials and supplies used for construction. This also ensures that all parties have access to builders risk insurance proceeds and forms in case accidents occur.
Builder’s risk policies also cover the various properties involved with construction. Besides the building that is being constructed, all fixtures, supplies, machinery, equipment and materials that are being used will also be covered in most policies. All temporary structures such as scaffolding, fences and other items are also included in the coverage. Though most materials are covered, items including automobiles, trees, other vegetation, and any contractors’ tools, machinery, or equipment will not be covered because they are not going to be a part of the permanent structure.
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