If you are starting a new commercial construction, renovating an old structure or handling a housing project, make sure builders risk insurance is included in your plan. This type of insurance protects against any sudden events such as fire, people stealing anything, vandalism and damage caused by various weather conditions.
Many people in the industry developers, contractors and property ownership ask the question: “How much builders risk insurance coverage is needed?” Here, we will break it down.
Understanding Builders Risk Insurance
Builders risk insurance is put in place to protect a construction project during its development. Usually, it consists of:
- The structure that is being built
- Items used at the construction site
- What is used as equipment during construction
- Examples include scaffolding and fencing which are built only for a certain period.
- In a few policies, debris removal is considered, as well as other soft costs.
This is different from general liability insurance which only manages claims involving third parties, because builders' risk insurance addresses problems directly related to the property or to buildings under construction.
Determining the Right Amount of Builders Risk Coverage
The recommendation for determining builders risk coverage is to ensure the total value of the completed project. This includes:
- The price of needed materials
- Labor expenses
- Overhead
- Profit (optional although it is highly recommended)
1. Begin by Making the Construction Budget
When your construction budget is $1.5 million, you should get builders risk insurance coverage for at least the same amount. Try to include the expenses of the building structure as well as interior finishes, main fixtures and landscaping in your estimates if they are included.
2. Look at How Long the Development will Take.
Builders risk policies are designed for a particular period, for example, 3, 6, 9 or 12 months. Should you have a short schedule that may not be flexible, choose a coverage policy that will not end until the project is complete.
3. Add up Soft Costs
Due to delays, you may end up paying for permits renewal, financing interests, architectural services and legal fees. Some builders' risk insurance plans give you the option to insure soft costs. This becomes even more significant when you are making large or complex projects.
4. Changes during Construction.
In many cases, construction projects change as they go on. Whenever you expect dramatic increases in the value of the project, you might consider raising your policy limits or including a flexible part in your cover.
Frequent Mistakes You Should Avoid
- Underinsuring the Project: Picking an insurance limit less than the whole value of the project could lead to costs covered by the company.
- Ignoring Subcontractor's Exposure: If subcontractors do not get insurance for their work, you may have to make their activities part of your policy.
- Failure to Update Your Insurance Policy: When costs rise during the project, make sure to change your insurance cover.
Work with Experts to Guarantee Your Success
No matter how the same projects appear, each one needs different policies. That is why you should choose insurance professionals who know all about builders risk insurance.
Building risk coverage at Dunbar Bedding Field is developed to suit the requirements of every building project. If you are working on a small home renovation or a big commercial construction project, we can help you decide how much insurance you need to protect your investment.
Want to Make Your Project Safe?
Unexpected issues should not stop your building progress. Turn to Dunbar Bedding Field for help with understanding builders risk insurance and concentrate on your job being done.
Feel free to get in touch with us today for quotes and recommendations made just for your construction work. When your building has the right insurance, you will not worry from the first day construction begins to the opening.