What Your Builder’s Risk Insurance Does Not Cover

Best Builders Risk Insurance Raleigh

Best Builders Risk Insurance Raleigh

Best Builders Risk Insurance Raleigh

The builder’s risk insurance, also called construction insurance, is a specific policy that helps manage your risks on project sites. In this day and age, constructions do not push through without this type of protection. However, the builder’s risk insurance is also one of the most misunderstood policies because of its multiple nuances.

For instance, some people think that this insurance is all-encompassing. Like most things, however, the policy comes with exemptions.

Best Builders Risk Insurance Raleigh

Before anything else, you need to know what your insurance covers.

Builder’s Risk Insurance Coverage

Generally speaking, you protect the property and tools on project sites when they sustain damage from natural and man-made events. For instance, fire, collisions, vandalism, and other disasters or incidents are valid reasons for you to get a claim. Apart from recouping your investment, the insurance cost may also cover debris removal.

You may also include your heavy equipment and tools stored in your yard off-site. But this is not a standard policy, so you may have to pay extra for that privilege.

Best Builders Risk Insurance Raleigh

However, you must understand that a builder’s risk insurance is fully customizable. Apart from the bare minimum, each policy is tailored to the needs (and budget) of the lender, contractor, subcontractor, architect, building owner, or engineer.

Things Excluded From Your Builder’s Risk Insurance

Now that you have a basic concept of what this insurance covers, you should also know the exclusions.

  1. Terrorism and war — Most insurance policies do not include acts of terrorism in their claims. Some private insurers offer a specialized program for it, and it’s called “political violence insurance.” Today, this has been extended to include claims for civil disturbances, strikes, and riots.
  2. Equipment and Tools — You may think your insurance already includes equipment and tools, and you are right. At least, partly. You must clarify this with your provider to determine the items included in your policy. Insurance companies vary in the way they offer equipment protection. For instance, they may cover your equipment when it sustains damage at a project site but not while in transit. Others will protect your vehicles and tools even when parked somewhere. Similarly, you cannot apply for a claim for vehicle breakdowns resulting from non-maintenance and other factors.
  3. Faulty design — Don’t expect the insurer to pay up when your construction work collapses due to faulty design. You need another liability insurance for that, especially if you are an engineer, contractor, or architect. Your insurance will only kick in if the building collapses due to an accident or other external factors specified on your policy.
  4. Weathering — A builder’s risk insurance also excludes a building’s wear and tear. Typically, this insurance is applicable for new construction projects. So, if there are already existing structures on the property, you don’t count them into your policy.
  5. Flood, storm, and earthquake — Your building insurance does not usually cover damage caused by natural disasters. However, you can ask your agent to add severe weather to your policy.
  6. Injuries and illnesses — You also cannot make a claim if one of your workers meets an accident or misses their shift due to a lingering illness. You need to secure separate protection for such. The appropriate coverage would be employee compensation insurance.
  7. Rust and corrosion — Ensuring your tools and equipment are free from rust is part of your responsibility as a contractor or subcontractor. So, your insurance will not pay for their repair or replacement.
  8. Theft — Losses due to employee theft will not be included in your insurance coverage. As a contractor, you are supposed to run background checks on your workers. As a result, you will have to pay for the cost of any theft out of your own pocket. However, your insurer may reimburse you for properties or tools stolen onsite by thieves. Make sure that your plan covers this as well.

Builder’s Risk Insurance Extensions

You can add as many extensions to your basic policy as you can. But, of course, it presupposes that your insurer offers these extensions in the first place.

Best Builders Risk Insurance Raleigh

As stated earlier, you can customize your insurance to include damage from severe weather conditions. You can also list the number of heavy equipment and tools excluded initially from your plan.

You can also add the following:

  • Scaffolding
  • Debris removal
  • Temporary structures
  • Construction forms
  • Project site cleanup (including toxic materials and pollutants)
  • Heavy equipment or vehicle damage while in transit
  • Heavy equipment or other vehicles parked off-site
  • Tools and equipment in storage

You can pay for these extensions quarterly, bi-annually, or annually as the insurer already adds the cost to your final bill.

Talk to Your Agent

You should regularly review your policy with your agent to determine the scope of the exclusions. Keep in mind that different insurers sell different policies with varying coverages. This way, you avoid future misunderstandings or the need to apply for a claim only to be rejected due to being ineligible.

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