What to include in a builder?s risk insurance checklist?

Posted by The Owner Builder Club on November 14th, 2016

Builders Risk Insurance is a legal document which is responsible for insuring a building under construction. Policies in this document cover either remodelling projects or new constructions. These policies are specific to projects and are purchased in addition to the general liability insurance of the contractor.

The checklist for a contractor’s risk insurance must contain the following:

• The business risk policy needs to cover supplies and building materials utilised for construction at the venue, both in transit and during storage.

• Scaffolding, fences leased or owned by the contractor and equipment should be covered from the point of view of transit and storage. In case of a disaster, you could be responsible for damage caused to equipment. The builder’s risk policy must provide coverage for the above eventuality.

• Check if foundations, excavation sites and temporary structures are suitably covered in the policy.

• Coverage against natural disasters such as floods, earthquakes, sinkholes and others like fire and theft must be available. Damage due to water and sewage should also be listed, along with a broad categorisation which includes unlisted causes.

• Study the policy to confirm if all the involved parties are named, such as building owners, mortgage firms if applicable, sub contractors and equipment owners.

• Confirm whether unnecessary costs due to faulty construction, errors in design, law changes and business interruptions are covered in the policy or not

Here are some of the areas you need to exercise caution:

• Events that terminate coverage must be clearly stated in the policy. The exact definition of when this coverage ceases should be in lieu with various contractual obligations of the involved parties.

• Debris removal needs to be covered, as do pollution and testing costs.

• Materials need to be insured with respect to replacement, and rented equipment should be covered.

• It would be helpful for you to utilise an insurance agent who is well versed with commercial insurance

For the risk insurance, one needs to know about both on-site and off-site coverage. In short, coverage limitations have to be checked, as some builders’ risk policies only guarantee tools and materials at the construction site, but not the ones in transit. This situation can be applied to storage as well.

Make sure you take a look at all the above mentioned clauses for complete risk insurance. This detailed check will be of help if you purchase new buildings in the future.