In safeguarding physical assets, whether the home you live in, workplace space, or building project, commercial property insurance is an important consideration. Whether you are a homeowner or subcontractor building a multimillion-dollar project, having a clear understanding of the basic principles of property insurance can make sure that you have everything covered in the event of a loss.
At Dunbar Bedding Field, we believe that the key to a sound insurance contract is having a solid understanding of the key concepts. So let us jump in and discuss the three basic principles of property insurance and how they apply, particularly in cases such as builders risk insurance.
1. Insurable Interest
The first is the principle of insurable interest, which is the fact that the policyholder would suffer a loss of money in the event of damage to, or loss of, the insured property. A person cannot legally insure the property unless there is an insurable interest.
For instance, a builder or contractor involved in building a new business building has a monetary interest in the completion of the project. Should the building suffer from fire, vandalism, or storm damage during the project, the contractor will lose substantial time and money. This is where the builder's risk insurance is used. Builders risk insurance is a specialized form of property insurance used to cover the cost of materials, tools, and labor during the building process, providing a safety net for vulnerable stages of development.
2. Principle of Indemnity
The indemnity principle guarantees the policyholder is put in the same financial position they were in before the loss, but not better off. Insurance is not intended to generate profit; it is intended to pay a loss.
Say your building project gets damaged by wind. Your builders risk insurance would compensate for the repair or replacement of the damaged material, but not pay you more than the true loss. This principle is significant because not only would insurance fraud prevent this from happening, but maintaining reasonable premiums for everyone is also ensured.
Applied to the construction industry, builders' risk insurance provides reimbursement if there are losses to the property such as stolen building materials from the work location or loss due to weather conditions. It safeguards the financial interests of the owner of a project, the general contractor, and also the subcontractor, depending upon the structure of the policy.
3. Utmost Good Faith
Insurance is an utmost good faith contract, where the insurer and the insured are both expected to make full and honest disclosures of relevant information to each other. The insurer depends on true data to measure risk and calculate premiums, while the insured relies on the insurer to pay as agreed.
To builders and developers, not disclosing important facts, such as the specific location, construction date, or cost of materials can result in denied claims or void policies. Builders risk insurance coverage is where transparency is important in relation to the nature of the project as well as the kind of risks involved, so the policy can reflect the potential exposures correctly and offer full coverage during construction.
Why It Matters to Builders and Property Owners
Understanding these three principles is of particular value to anyone who is involved in the process of construction, renovation, or real estate development. Builders risk insurance is not another policy, it is a specialized type of property insurance that is meant to safeguard works in process, which is often the most vulnerable to loss or damage.
Adhering to the principles of utmost good faith, indemnity, and the principle of insurable interest ensures that your insurance works as planned. Whether constructing a new home of your own or creating a commercial development, these basic concepts lower risk and increase financial security.
Keep Your Project Covered with Dunbar Bedding Field
At Dunbar Bedding Field, we offer specialized builders risk insurance coverage to suit your particular requirements. Our agents work closely with you to review your project and offer the protection you require from the breaking of ground to final inspection.
Do not leave your investment vulnerable, get the insurance coverage that your project deserves. Contact Dunbar Bedding Field today to request a quote and consultation on builders risk insurance.