9 Critical ways builder’s risk insurance policy can protect your business

What would happen to your construction project if a sudden fire or theft occurs before completion? Builder’s Risk Insurance not only safeguards against such unforeseen events but also ensures that your investment remains protected throughout the construction phase, making it an essential consideration for any builder or property owner.

Builder’s risk insurance is a critical aspect of any construction project and shields against various risks that could jeopardize project completion. Even though it seems intuitive for the contractor to procure this insurance policy, it has more benefits for the property owner to take charge of this responsibility. This Blog shares with you insight into the best reasons you should have Builders Risk Insurance in St. Louis.

When there is damage occurs on the constructing property, as per the builder’s risk insurance policy between the insured and policy team, the damage experts verify and calculate the estimated cost of repair for the agreed-upon scope. Markups on allowable percentages for overhead and profit are typically applied to the estimated repair costs. In addition, the cost of repair is bound to the terms of the executed contracts and subcontracts in place for the project. These executed contracts and subcontracts often include previously agreed unit pricing for material, equipment rates, and labor rates. The contracts will also define the applicable wage rates for the project.

Construction sites are vulnerable to theft and vandalism. Costly materials and equipment left on the site have a higher chance of getting stolen or damaged. This leads to project delays and additional finance. Having Builder risk insurance can cover the losses that occur due to theft and vandalism, protecting the property owner from financial losses.

Usually, builder’s risk insurance typically does not cover on-site accidents that involve workers or third parties. However, some insurance providers offer add-ons or supplemental coverage that can extend the policy to include certain on-site accidents or liabilities. Here are a few common add-ons you can consider:

• Third-Party Liability Coverage: This extension covers legal fees and medical expenses arising from injuries to third parties on the construction site. It is crucial since Builder's Risk Insurance typically excludes liability for such incidents.
• Employee Injury Coverage: While Builder's Risk does not cover employee injuries, adding workers' compensation can protect against medical costs and lost wages for employees injured on the job.
• Faulty Workmanship Coverage: This extension provides coverage for damages resulting from poor workmanship, which is generally excluded from standard Builder's Risk policies.
• Debris Removal Coverage: If a covered peril causes damage, this add-on can help pay for the costs associated with removing debris from the site, which can be significant after an accident.
• Extended Maintenance Coverage: This covers accidental loss or damage during maintenance activities, ensuring that any rectifications needed post-construction are also protected.
• Property in Transit Coverage: This protects materials and equipment while being transported to and from the construction site, addressing risks that may arise during the movement of essential items.
• Scaffolding and Temporary Structures Coverage: This extension covers scaffolding and other temporary structures used during construction, which may not be included in the standard policy.

By incorporating these add-ons into the Builder's Risk Insurance policy, contractors can better safeguard their projects against a broader range of risks, including those associated with on-site accidents.

Equipment damage comes under standard coverage with the builder’s risk insurance policy. It covers building components including foundations, fixtures, machinery, equipment used to service the building, building materials and supplies, and debris removal in the event of a loss. This includes both owned and rented equipment.

Builder’s risk insurance can cover labor costs under specific circumstances, particularly when the need for repairs arises from a covered event. The insurance may help cover the associated labor costs needed to restore the work. Some insurance providers offer endorsements like faulty workmanship or LEG 3 provision, which can expand coverage to include certain costs associated with defective work and reimbursement of labor costs. However, contractors and property owners should carefully review their policy terms and consult with their insurance provider to understand the extent of coverage.

Project delays make the project costlier than planned. Soft cost coverage can protect against costs from;

• Additional insurance
• Real estate taxes
• Additional interest
• Bond and permit fees
• Legal and accounting costs
• Other administrative costs

For example, a local burger shop is expanding its new storefront, but during the process, a flood strikes and causes significant damage, pushing back opening day by six months. With soft coverage, the shop’s owners would be able to claim for loss of income and other expenses mentioned above, from the date the construction would have been completed had there not been a flood, to the actual time of completed construction.

Delay coverage compensates for financial losses resulting from delays in the construction project due to covered events, such as fire or vandalism. Unlike Soft Costs Coverage, It specifically addresses the impact of delays on the project's timeline and the associated financial repercussions, such as lost revenue and increased costs. The coverage starts when a covered loss causes a delay that extends beyond the original completion date.

Liability coverage protects businesses from financial losses if they are held legally responsible for injuries, accidents, or damages to third parties during construction.

Key Aspects:

• Third-party physical injury: If a laborer is injured on-site, liability coverage helps cover medical expenses, legal expenses and fees, and any potential settlements.
• Legal Defence Costs: In case of a lawsuit due to on-site accidents, it covers legal fees, settlements, and judgment which could possibly save you from the major financial burden for the construction company.
• Property Damage: During construction, liability coverage will cover the cost of repairs and any associated legal claims if any third-party property gets damaged such as nearby buildings or vehicles.

The major advantage of having builder’s risk insurance is, it can be customized to meet specific project needs. Insurance providers often allow for various endorsements and adjustments to tailor the policy according to the unique requirements of a construction project.

Customization Options

• Coverage Limits: Policyholders can adjust coverage limits based on the total value of the construction project, including materials, labor, and any additional expenses.
• Endorsements: Additional coverage options mentioned in this blog above can be added.
• Specific Risks: Policies can be tailored to address specific risks associated with the project, such as theft or vandalism in high-crime areas, or natural disaster coverage for projects in vulnerable locations.
• Project Type: Different types of construction projects (residential vs. commercial) may have varying coverage needs, and policies can be adjusted accordingly.
• Duration of Coverage: The policy duration can be customized to match the timeline of the construction project, ensuring coverage throughout the entire process.

Moving without builder’s risk insurance can expose property owners and contractors to

• Financial Exposure
• Project Delays
• Risk of Theft and Vandalism

during the construction projects. Contractors and property owners need to secure this coverage to protect their investments and ensure the better progression of construction projects.

We, Jain Insurance Agency, an authoritative Builders Risk Insurance provider in St. Louis, understand the unique risks associated with construction, we are committed to providing tailored insurance solutions that protect your investment. Contact us today! Let’s discuss how we can help you to shield your assets and finances during the construction.