Builder’s Risk Insurance vs Contractors Liability Insurance

Which insurance for a building under construction is best for your project?  With so much at stake, getting the necessary coverage can be stressful and confusing for contractors. Two cornerstones of any plan are Builder’s Risk and Contractor’s Liability insurance. Are you clear on the differences? In this article, we’re going to discuss the main ways these polices differ.

Contractors Liability For When You’re At Fault

Liability payments happen when one party is responsible for damages. This coverage is more necessary than ever. Contractors Professional Liability claims increased 23% between 2016 and 2017. On any construction job, there are tons of opportunities for liability: Digging trenches, re-roofing, or operating heavy vehicles all present many chances for accidents to occur.

Despite rigorous risk management, this is just a fact of the industry. The work is dangerous and slip-ups happen.  When there is an error, your Contractors Liability Insurance offsets the losses so you aren’t hit with a massive bill.

Builder’s Risk For When Neither Party is At Fault

Builder’s Risk is insurance for a building under construction.  It covers the construction and materials against damages caused by ‘external’ events like storms, fire, theft or vandalism.

For any construction site, these can be huge problems. Wind is the most common, responsible for 28% of Builder’s Risk claims. Construction site fires only account for 0.2% of all fires.  But they’re considered an extreme cause of loss in construction because the devastation they wreak is so severe. Think about all the materials and exposed structures, and that starts to make sense.

How Liability Coverage Works

Another key difference between Contractors Liability and Builder’s Risk is how and when these policies are activated. For Contractors Liability coverage, there is usually a predefined jobsite where damage may occur. A third-party files a claim, which is then settled, before receiving any money.

Contractors Liability is legally required for all contractors. There are limits on each type of loss the policy covers.  For instance, the minimum for property damage and personal harm combined is $1,000,000. This goes towards repairs, replacements, legal fees and medical costs.

How Builder’s Risk Works

Builder’s Risk insures against any ‘covered cause of loss’ specified when the policy is drawn up. A basic policy only provides insurance for a building under construction. If any listed external events occur, Builder’s Risk can be triggered without requiring a formal claim.

Most policies include weather events, arson, theft and vandalism. But there’s much flexibility, depending on the specific risks of your job. Extensions cover water damage, property in transit and temporary structures.

It’s not legally required to have Builder’s Risk. But you may struggle to find clients without it, especially when financial lenders are involved.

At only 1-5% of total costs, an easy safeguard for your business is carrying good insurance for a building under construction.

Insurance For A Building Under Construction And More

Protecting your business from harsh losses means staying informed of the ins-and-outs of each type of policy. Builder’s Risk in particular is non-standardized. It’s often hard to know if you have the best possible insurance for a building under construction.
We can experts in construction insurance and will find the best coverage for your business. Call Builder’s Risk at 887 960 0221 to find out more.