While homes are vulnerable to unexpected damage at any time, they are especially prone to harm during construction. The structure and the contractors working on it face high risk during building.
Builders insurance, also known as builders risk insurance, is the most important protection to carry during this process stage; many jurisdictions require it as part of residential construction.
Here is what you need to know about home builders insurance for risk management: how it works, what it covers, and how it can be supplemented to provide the broadest scope of risk reduction.
How Home Builders Insurance Decreases Risk
Builder’s risk insurance is the primary defense against accidents and mistakes during home construction. The immediate risk at this stage of the project is damage to the sensitive inner workings of the structure before it has been completed and protected from the outside.
Thus, a builder’s risk insurance covers the structure against disasters that it may typically be able to withstand if it were complete, such as lightning strikes and hail. Your home builder’s insurance coverage also decreases the financial ramifications of fires, whether electrical or caused by nature, and explosions and acts of God, such as hurricanes or tornadoes.
While these incidents can certainly harm an entirely constructed building, they are more damaging when the structure’s protections have not yet been completed—and before homeowner’s insurance comes into effect.
Another risk faced during the home building process is exposure of the inner structures to the public. For a brief time, security on the new building is often limited to fencing surrounding the work site. The builders’ risk insurance can cover vandalism and theft during this time.
Other Options For Mitigating Risk
Building a home is risky, and those seeking to mitigate the threats faced during this procedure should consider what their insurance will cover. While an essential builder’s risk policy protects against the threats mentioned earlier, more comprehensive options will include supplemental protections that decrease the risk contractors (and homeowners) face throughout this process.
For instance, look for a policy that contains materials and supplies coverage. This ensures that the equipment necessary to complete the project is safe from theft, whether at the construction site or in temporary storage, such as in a trailer for transit.
Further protection is available with some policies to cover damaged equipment while being transported to and from the job site. Construction equipment frequently costs more than the vehicle used to transport it, and replacement can be a significant financial burden.
The most comprehensive builder’s risk insurance will also include coverage for debris removal. Should something happen to a structure during construction (and one need not look far to see that unpredictable accidents such as these occur frequently), the risk lies not only in the threat to people on-site and the build timeline—it also applies to the financial repercussions of cleaning up.
If debris needs to be removed, this could add tens or even hundreds of thousands of dollars in costs without proper insurance protection.
Adjusting The Cost Of Builders Insurance
Builders insurance is an essential element in a contractor’s toolkit, and it can be highly affordable when sought with the proper strategy. Bundle the builder’s risk insurance with other policies (such as tools & equipment or E&O) from the same insurance agency where possible. This can generate a bundle discount that lowers the annual or monthly premium for coverage.
In addition, invest in demonstrating that you are a low-risk insured. In other words, pursue continued education to stay on top of industry developments in construction safety standards and be diligent about your company’s behavior on-site.
This includes securing tools and operating them according to manufacturer instructions. Those who prove they are consistently conscientious and safe on the worksite can enjoy lower premiums since they are less risky to insure.
Get The Home Builders Insurance You Need From Burton & Company
Home building is a lengthy exercise in risk management, and skilled contractors can adapt their behaviors to mitigate risks wherever possible. However, not all challenges can be avoided, whether due to Mother Nature or the unpredictable actions of other people. This is why builder’s risk insurance is essential in risk management for home builders.
The experts at Burton & Company can provide robust builders insurance to protect new construction against the many threats that it faces. Contact Burton & Company to discuss your insurance options and create a customized blend of protection that suits your project goals and needs.