5 Reasons You Need Builder’s Risk Insurance
As a contractor, it is extremely risky to have multiple ongoing projects that are not insured, most clients will not hire you without insurance. For this reason, contractor’s insurance is essential to protecting yourself and your livelihood.
There are many types of insurance for contractors. Builder’s risk insurance, also known as course of construction insurance, is designed to protect contractors and property owners during ongoing construction or renovation of sites.
Contractors must ensure they are well covered for the project’s duration, especially if the site is exposed to external forces that could lead to monetary or equipment losses.
Getting builder’s risk insurance is vital for protecting all your renovation and construction projects from damage, theft, vandalism, and fire. This insurance protects ongoing construction projects from external damages, delays, and unprecedented costs.
It is also a great way for builders to cement their business reputation, as many clients and investors look for businesses that insure their construction projects.
Course of construction insurance is not only suitable for businesses, but also protects property owners, site engineers, architects, contractors, and subcontractors during the course of the construction.
If you are looking to understand contractor’s insurance, including how course of construction insurance can be beneficial for your renovation or construction project(s), here are the five reasons for you to consider getting a builder’s risk insurance policy for all your construction projects:
1. Protect long-term projects that are exposed to external factors
Renovations and construction projects that last for a considerable amount of time expose your site to external factors like weather-related damage, fire, explosion, vandalism, theft, and other types of accidents that may occur while the project is ongoing.
These damages can lead to massive expenditures and losses if the project is not insured adequately.
2. Insure materials & supplies at the construction site
Builder’s risk insurance also covers construction materials and supplies at the construction site. The largest threat to materials is theft. A builder’s risk policy would cover theft of materials on or adjacent to the property intended to be used in the course of construction.
Course of construction insurance can cover materials and supplies at the site that the insured has an interest in. The contractors’ tools and equipment on site should be insured by the contractor themselves.
3. Insure costs due to project delays
Builders Risk policies typically have coverage for costs due to delays, eg. Loss of Earnings, Extra Expenses, Expediting Expenses etc. Keep in mind, typically for this coverage to be triggered there would need to be direct physical loss from an insured peril. There is also coverage for delays due to government shutdown, however there would still have to be a direct physical loss to either the project itself, or another location within a specified distance.
4. Debris removal
It is extremely expensive to clean up and remove debris after demolition or even external damage caused to the property.
Any damage caused to the property will require the builder/contractor to hire a clean-up crew and pay extra for debris disposal.
5. Get additional project costs (Soft Costs) covered
A lot of obscure expenditures like real estate taxes, engineering, architecture, and permits add up when it comes to the total cost of a project.
These costs are called soft costs and they should be considered when looking at acquiring a builders risk policy. These overhead costs can amount to thousands of dollars. It is common for contractors to overlook these soft costs.
A builders risk policy can include coverage for these soft costs.
Who can use builder’s risk insurance?
A construction project for commercial properties, recreation and sports centres, new residential properties, and major property renovation are all required to have a builder’s risk insurance policy.
A builder’s risk insurance policy covers the actual property while being built, the materials being used in the course of construction, and physical losses or damage caused by an insured event like fire, theft, and vandalism.
Several reputable builders and contractors with a large client base typically get these insurance policies tailored for additional coverage like project interruption costs, wrap-up liability, and clean-up/removal of debris.
How expensive is contractor’s insurance?
The cost of builder’s risk insurance differs from one project to another based on the scale, type, and duration of the project.
The premium to be paid is typically determined based on the kind of construction to be done. Some factors that are considered while deciding the cost of the insurance are:
- Project locations
- Project size
- Project tenure
- Previous claims records
- Additional coverage requests like demolition, drilling, or mining
A builder’s risk policy covers projects from unmitigated risks, direct damage, and some interruptions leading to project delays. For construction businesses, getting insured shows that you are well-prepared and protected against risks.
Clients feel safer working with contractors who can offer a well-covered insurance policy for long-term or expensive projects.
At James Campbell Insurance, we offer tailored insurance plans that are project-specific and cater to different business requirements.
We also provide contractor’s insurance in Ontario. To learn more about which type builder’s risk insurance is best suited for your project or business, call James Campbell Insurance at 1-833-459-1065 or contact us here.