We hope that this list of Builder’s Risk Insurance FAQ will give you a better idea of how this coverage works. If you still have questions, please contact one of our agents. We can help!
Do all contractors have to have Builders Risk Insurance?
In general, the law does not require you to have a Builders Risk Insurance policy. However, if you do not have this policy, most of your clients will refuse to work with you. Your clients highly value this insurance because it is a sign that you will take care of their property. During a construction project, many types of losses could occur, including financial loss. If you have this insurance policy, you will have some peace of mind. As a builder, buying insurance is one of the best things you can do for your business.
How much do I insure the project to?
You are required to insure your project to 100% of the final value of rebuilding. Remember this is not the market value of the project, but the replacement cost in building. This value will not include the value of the land. As you are doing the building or you have a contract with a builder, who will be building the project this should be an easy number to come up with. Remember the cost is not high for this product and you are best estimating the costs on the high side. This leaves you some room in your number if costs go up.
What is co-insurance?
You have to insure your project to 100% of replacement cost. If you are insured below this, in the event of a claim you will receive a co-insurance penalty. The amount of the penalty will be calculated from the following equation:
Insured amount/replacement cost * amount of claim = settlement
Lets assume you are insured to $300,000 and your replacement cost is $400,000. In the middle of your construction there is a claim for $100,000. The amount you would be paid is $75,000 per the co-insurance penalty equation. You would be $25,000 out of pocket.
$300,000/$400,000 * $100,000 claim = $75,000
As you can see, this is an extremely important provision in your policy.
How much does a ground-up construction policy cost?
Several factors determine the cost of a ground-up construction policy. The locations of the construction project and construction materials are two important factors. If the project is 50 miles away from the coast, the cost is $200-$500 per $10,000. If you want to save money, taking a higher deductible can be a good idea.
Are soft costs included?
Costs for architects, lawyers, expediters etc. are not covered, but can be added by endorsement. It is a very good idea to add these and it is not expensive.
If I cancel, do I get my money back?
Short answer is no. Builders risk policies are known as “One Shot” policies and there is not return of premium when the builders risk policy is canceled.
If the project becomes bigger or more costly, can I increase coverage?
Yes, absolutely. You only will need to call your agent.
Can I pay for the premium out of escrow at my mortgage company/bank?
Yes. It is very easy to set up and we would only need the contact of your mortgage broker/banker to set up. The check to the insurance company will be sent out of closing.
Who are funds paid to in the event of a loss?
The funds are paid to the lien holder/mortgage company. From here the funds can be drawn as repairs are made or rebuilding restarts.
If I have a larger project, is it possible to have a schedule where buildings are coming on and off as they start and finish?
Yes this is possible and it is called a “reporting form” policy. Every month you send in your starts and finishes to the insurance company and the pro-rate your insurance policy
What happens when project is finished?
If the project is a home, you will need to buy a homeowners policy when the project is finished. Usually you can only qualify homeowners insurance, if the home is occupied. Once the home is occupied, it is very easy to call us for a homeowners quote and the price is inexpensive since the building is new. It is very important to call and change this as soon as possible in that the homeowners policy offers much more coverage in terms of liability, loss of user, sewer back up, personal property, etc.
How long does it take to get a policy into force?
Literally hours. Since there is no real underwriting in that nothing or very little it there, most of the major companies are “quote and issue” meaning the policy can be bound by the agent in minutes as long as they have a check or an approval from your mortgage broker that the policy will be paid out of closing.
How long does a Builders Risk Insurance policy last?
In general, the duration of the policy is 6 months to 1 year. However, if there is no claim during construction, you can renew the policy very easily. If the project goes longer than 2 years, it may be more difficult to renew. Is it time to renew your insurance? We can help.
Does Builders Risk Insurance provide liability coverage?
Builders Risk Insurance only provides coverage for property damage. It does not provide coverage for liability. If, as a general contractor, you need coverage for liability, you can consider buying a general liability insurance policy too. The cost of this project is not very high. Every contractor needs different insurance coverage. You can find out more about contractors liability insurance here.
Is my project covered for wind/hail?
Many policies in coastal and tornado states do not cover for wind and hail or there is a special % deductible for any claim resulting from these types of losses. This is very important to know for the costs can be very high for this coverage and it will be mandatory from your bank.
Does Builders Risk Insurance provide coverage for theft?
Yes, there is coverage for theft, but the extent depends on your particular Builders Risk policy. In some policies, the Builders Risk coverage does not go beyond the amount of the policy. In other words, they provide limited coverage for theft. Some insurance policies don’t provide any cover for theft. At Builders Risk Insurance, we know that theft is a primary concern for contractors. This is why we make sure that your Builders Risk Insurance policy covers theft. Theft of materials is very common
Can anyone buy Builders Risk Insurance?
For any insurance, there are terms that you have to adhere to. You have to meet some extra requirements to buy a Builders Risk policy. As a builder, you must have 2 years of experience in your field of expertise. Also, your project should have an insurable interest. When buying insurance, you have to provide basic information about your project to the insurance agency. One of our agents will tell you what information you need to provide. Just give us a call now (877) 960-0221
Why purchase Builder’s Risk Insurance from BuildersRisk.net?
BuildersRisk.net focuses on only insuring builders risk and property coverage. We have over 15 companies we write through to get you the best value for your money. In contrast in your local agent might have one or two. In 99% of the cases we write, we can have a policy to you the same day. Give us a chance to compete with your current agent and we are certain you will be satisfied with your pricing and coverage.
We hope this page of Builder’s Risk Insurance FAQ has answered your questions. We can help you with the next step. Get a quote for the best rates here.
We have 1 simple goal here at Builders Risk: to provide first-class customer service and the best rates to match. We work with over 15 carriers to search for the best coverage and rates across all 50 states in America. In covering all 50 states, we ensure to personalize each plan specifically to you, your business needs and location. As you can see from our Builder’s Risk Insurance FAQ, we know how it works and we can guide you with confidence.
We guarantee Class A satisfaction when shopping with Builders Risk which is why we only affiliate with Class A companies who can deliver policies in less than 1-Hour.
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