5 Builder’s Risk Secrets for New Contractors

As a new contractor, getting insurance for your small contractor business should be a priority. And if there’s one thing COVID-19 has taught us, it’s better to be over-prepared than underprepared. 

The pandemic aside, contractors have other risks to be concerned about, including wildfires and hurricanes. In Louisiana and Texas, for instance, Hurricane Laura is estimated to have caused residential and property damage of $12 billion in insured wind and storm surge losses.

Builder’s Risk Insurance is for property damage

Builder’s Risk insurance, a type of property insurance, can help protect your buildings and structures under construction from such losses. As a new contractor, here are a few points about the policy you should be aware of.

1. It not only covers buildings and structures.

Construction sites are exposed each day to numerous risks that could cause significant property damage, and consequently, considerable financial loss. A Builder’s Risk insurance policy, in addition to the insurance offered on the building and structures themselves, offers coverage for:

• Building materials and machinery on-site, in transit, or stored at other locations
• Temporary structures such as scaffolding
• Fixtures, such as electrical wiring, plumbing installations, and HVAC systems
• Foundations
• Construction signs
• Landscaping

The policy provides for the replacement cost equal to the total completed value of the damaged property. It is, therefore, important to value your project accurately to prevent underinsurance.

2. It can cover hurricane damage

Builder’s Risk insurance for your small contractor business will also provide coverage for property damage as a result of various events, with most standard policies covering the following causes of loss:

• Fire
• Theft
• Vandalism
• Hail
• Lightning
• Explosion
• Smoke 
• Vehicle or aircraft collision

It’s also advisable to familiarize yourself with your policy’s exclusions. Wind, earthquake, hurricane, and flood are, for instance, usually excluded in coastal areas. However, if your project is based in an area vulnerable to such risks, your insurance provider may give you the option to purchase extensions to account for said causes. Your policy, in this instance, will end up costing you more.

3. It can pay for soft costs

Besides property damage, a covered loss (e.g., Coronavirus-related business interruption) could lead to a delay in the completion of your construction. Consequently, you could incur soft costs, i.e., expenses not directly related to construction. 

These costs include loss of rent, additional interest on loans, architectural and engineering expenses, and real estate taxes. Adding a business interruption coverage extension to your Builder’s Risk insurance policy will help pay for such costs in the event of a covered loss. 

4. It can reimburse your profits

Property damage may affect your business’s productivity, and eventually, your profits. Fortunately, Builder’s Risk insurance can reimburse you for a proportionate percentage of profit earned, as of the date of the loss based on profit assumptions from the job estimate. If not included as a standard option in the small contractor business insurance policy, but most insurers will offer profit coverage as an extension.

5. It covers debris removal

The cost of cleaning up debris after a covered loss can be quite sizable. So, if your Builder’s Risk insurance policy does not offer debris removal as standard coverage, you should consider getting an extension of the same. Keep in mind your insurance provider will only pay for the costs up to the amount listed in the policy.

Where to purchase Builder’s Risk insurance for your small contractor business

Each construction project faces its own unique risks, so your Builder’s Risk small contractor business insurance policy should be customized to suit your project’s needs. Our agents at Builder’s Risk can help you find the ideal policy for your project, both coverage and price-wise. Contact us today at 877 960 0221 to get an instant quote.