How much does builders hazard insurance cost? Do I need it to keep my business safe? The coverage a builders hazard insurance policy provides is pretty self explanatory.
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Often referred to as “construction course” insurance, builders risk protects against damage or loss incurred by buildings being constructed or renovated.
Generally covers losses related to events such as fire, wind, vandalism, storms, theft, and more, depending on your insurance provider and the policy you purchased.
This policy generally covers not only the building itself, but also other assets related to the construction project, such as temporary structures, building materials, even documents or data that are housed at the project location.
As already mentioned, builders risk insurance not only covers projects during which new structures are being built, but can also be purchased to protect existing buildings that are being renovated or upgraded.
Builders risk insurance is actually a specialized form of commercial property insurance. It can be purchased separately as a stand-alone policy or as a supplement or endorsement to an existing property or inland marine insurance policy.
In most cases, a builders risk insurance policy is designed to expire when your construction project is complete.
Let’s take a closer look at what this insurance policy typically does and doesn’t cover, as well as what you can expect to pay for it.
who needs builder’s risk insurance?
Anyone involved in the construction project can take out the builders risk insurance policy. Some assume that it is a policy that only construction companies or contractors buy, but in reality, anyone who has any kind of financial interest in the project and the property can buy the policy.
Local government agencies typically require proof of insurance before granting you a building permit for your project. government agencies want to see that you have a builders risk policy to confirm that your project meets local building codes.
It can be purchased by construction companies, contractors and subcontractors, but also by building owners, engineers and architects involved in the project.
In most cases, only one party will purchase the actual policy. however, they will generally add the other relevant parties to the policy as named insureds via an additional insured endorsement.
what is covered
As we have already discussed, a builders risk insurance policy covers physical loss and damage caused by storms, fire, wind, theft, vandalism, various contamination (fungus), and even vehicle and aircraft collisions with the property. .
Some builders risk policies will also cover damage to building materials and temporary structures associated with the project.
If these things aren’t covered by the policy, it might be a good idea to purchase a business interruption insurance policy as well, so you can have coverage in case your project is delayed due to damage to building materials. building. or temporary structures that need to be rebuilt before the project can move forward.
A Preferred Builders Risk policy will cover building materials, documents and data (such as plans and other building specifications), scaffolding, signs, and other temporary structures.
The policy may also cover what construction companies often refer to as “indirect costs.” soft costs can be things like additional property taxes and any potential penalties owed to local government agencies.
Some builders risk policies will also cover costs such as debris removal in the event of property damage to structures and building materials that will need to be removed from the property before the project can restart.
As with commercial property insurance policies, the policyholder can choose between purchasing a replacement value or actual cost policy. A replacement cost policy costs more since an actual cost value policy covers the depreciated value of the damaged property, while a replacement cost policy will cover the cost of the materials when they are new.
Like any other insurance policy, a builders risk policy has common exclusions that will not be covered. exclusions generally consist of events that are normally covered by other insurance policies.
For example, if one of your workers steals building materials and other property from the site, a builders risk policy won’t cover these damages, since employee theft losses are typically covered by a business crime policy.
Damage to your work vehicles will also not be covered by a builders risk policy, because this type of damage is usually covered by a commercial auto insurance policy.
Earthquake and flood damage are generally not covered by builders’ or commercial property’s hazard insurance, but if you need this coverage, you can purchase specialized policies to protect your project from these types of risks if earthquakes strike. o Floods are common events where your construction project takes place.
A builders risk policy will also not cover defects in design, workmanship or manufacturing defects. These types of damages are usually covered by some form of professional liability coverage that contractors, subcontractors, architects, and engineers must purchase as a guarantee of the quality of their work.
Policy language on exclusions can vary widely from insurer to insurer, so it is incredibly important to work with a dedicated and experienced insurance broker or agent when putting together your builders risk policy.
how much does builders hazard insurance cost?
To get a good idea of what a builders hazard insurance policy costs, it’s important to understand the factors that will affect the cost of your policy.
Most insurance policies take into account the characteristics of your business, such as how many employees you have, how much revenue you make, and the size of your company.
however, the cost of builders risk insurance is related more specifically to the characteristics of the construction project in question.
When calculating a premium for this policy, insurers will consider the following factors, among others:
- how much does the project cost
- where is the project
- the level of experience of the contractors and subcontractors involved in the project
- how long it will take to complete the project
- the quality of its construction materials
- the size of the construction site
- frame: buildings where the walls, floors, and ceilings are made of wood or other combustible material.
- joisted masonry: buildings with ceilings, floors, beams, and supporting joists made of combustible wood materials but exterior walls made of stone, brick, or concrete.
- all steel: buildings with roofs and walls constructed of sheet steel or aluminum.
- non-combustible masonry: buildings with walls of stone, brick or concrete with floors and ceilings of some type of non-combustible material.
- fire resistant: buildings that are specifically designed to withstand an interior fire for a period of several hours.
When clients ask insurers how much they can expect to pay for builders hazard insurance, a common calculation that often gives a good estimate is that the policy will cost between 1-5% of the total construction project budget. construction.
coverage limits and construction types
Another thing to keep in mind about builders hazard insurance is that there are many coverage limits you can choose from when purchasing your policy.
Insurers often offer different coverage limits and coverage prices depending on the classification of the construction project.
This is very important information because rates can vary by up to 50% depending on the type of construction project you are insuring.
Also, if you don’t answer this question correctly when purchasing your builders risk policy, you’re likely to be in a lot of trouble if a claim arises.
In some cases, an insurer might even deny the claim if the construction project’s classification on the policy is incorrect.
some common construction types include:
Obviously, highly combustible and flammable properties will be more expensive to insure. If you don’t know what kind of materials your building is made of, your insurer will usually place the property in the more expensive “structure” class code.
This protects the insurer in the event of an expensive claim related to a fire that destroyed the entire property.
If you would like to learn more about builders risk insurance and discuss your business insurance needs with an insurance expert, feel free to contact one of our experienced brokers at any time.