Homeowners everywhere rely on competent builders to create their construction so the new home is safe, appealing, and long-lasting. While homeowners have insurance for what might go wrong during their years of ownership, home builders need a different type of coverage. Builders risk insurance can protect contractors from the financial consequences from damage, accidents, and more during construction.
Even teams that follow all safety protocols correctly and prepare their worksite thoroughly ahead of time cannot always predict what might go wrong throughout a job. From downtime to natural disasters, builders must be sure to insure their projects against the many risks they will likely face when, not if, an unexpected event occurs.
The Most Common Risks and the Insurance That Addresses Them
While many things can go wrong during the home-building process, some perils are more likely than others to affect a contractor team. The most frequent claims filed under home builder’s insurance include:
Theft and Vandalism
Many elements of a home build are left unprotected in the early stages when scaffolds and basic structures are still being built. While contractors should take their handheld tools with them at the end of each work day and store them securely, not all items can be removed from the worksite. Lumber and heavy machinery, such as backhoes, are typically not moveable once they arrive at the construction location.
Because of this, some items can be stolen or vandalized while workers are away. This can result in significant financial losses when replacing or remediating items to usable condition.
For coverage use: Equipment Insurance, which addresses damage to valuable equipment and costs associated with theft and vandalism.
Natural Phenomena
Even the best preparation cannot stop Mother Nature. Flooding, hail, wildfires, tornadoes, and more are all possibilities that could cause damage to construction or, at worst, destroy the team’s progress. This may result in costs associated with replacing the materials and paying workers’ wages to restart work and losses from failing to comply with the build timeline.
For coverage use: Generalized Builders Risk Insurance, which can cover such widespread financial losses.
Accidental Damage to Nearby Property
Home construction takes place on a purchased lot. Still, due to the equipment’s size and the installation’s complexity, nearby properties may accidentally be affected. Construction teams should always strive to avoid involving neighbors in the construction process, but accidentally tearing up a yard with heavy machinery or cutting down the wrong tree can cause significant damage to third parties. The builders are responsible for compensation if they do not have insurance to help.
For coverage use: General Liability Insurance, which compensates third parties for physical injury or property damage.
Material Sourcing Delays
When builders create their estimates (of both finances and timeline), they do so by comprehending how long their work should take and what current market conditions dictate. However, the market changes every day, and builders may suddenly find that they need help to promptly source the materials they are counting on.
Even worse, that material may no longer be available by the time estimation is completed and the building begins. Falling off the projected timeline due to these issues can cause financial problems in and of itself.
In addition, having to pay extra for expedited shipping or needing to choose a more expensive alternative can quickly bring a project over the expected budget, which must then be deducted from the construction team’s profits if insurance does not cover the change. People need only recall the sudden market shifts associated with COVID-19 to understand why such unpredictable events can completely alter the course of a project.
For coverage use: A strong Builders Risk Insurance policy that includes protection for supply chain issues. Add Business Interruption Coverage for greater protection.
Liability for Incorrect Execution
Builders are expected to complete their construction correctly and up to code. Suppose homeowners find a code issue or an installation that is not up to their expectations based on the blueprint or the work quality. In that case, the construction team is liable for fixing it at their own expense.
For coverage use: General Liability Insurance and Professional Liability protection, often called Errors & Omissions Insurance.
Secure Your Build Project With Insurance From Burton & Company
Builders are an essential part of what keeps residential housing available for families across America. However, these builders risk significant financial losses on multiple fronts if they do not secure appropriate insurance for their projects.
The professionals at Burton & Company can advise your team on the right mixture of insurance coverage to address the perils that are most likely to affect your project. Contact Burton & Company today for a customized insurance package.
