Video: What is Builders Risk Insurance?

Understanding Builders Risk Insurance

Builders Risk Insurance is a type of insurance that covers your property while it is under renovations. It can cover remodels or ground up construction. This insurance can cover the property, renovations and building materials. Builders Risk will cover up to the coverage limits. Remember that the value of the structure needs to be accurate. You can have coverage for a million dollars when you home or soon to be home is valued at three hundred thousand dollars. Materials and labor cost should be included in the total value of the structure. If you do not know the value of the structure, the construction budget may help you determine a good estimate. Builders risk policies may go for about 3, 6, 9 or 12 months for renovations. For new construction, it may go for 6 to 12 months. Some carriers may only do 12-month policies if it is for new construction. New construction meaning ground up construction not adding an addition.

Builders Risk coverage will provide cover in case your property gets damaged from a number of things.

•  Fire
• Wind
• Theft (Building Materials)
•  Lightning
• Vandalism
• ExplosionBuilders risk will cover theft but only for building materials. I once had a lady who tried to get coverage for builder’s risk and though that since builders risk covers theft it will also cover her kitchen appliances while her house is being renovated. I had to explain to her that her refrigerator and microwave had nothing to do with her renovating her home.Your builder’s risk policy will also have a number of exclusion. You get familiar yourself with these exclusions as well.

•   Earthquake
•   Water damage
•   War
•   Water damage caused by an open roof or just your property being open
•   Government workThe price of your builder’s risk policy will always be different. It all depends on the size of the project and what exactly it is that you will be doing on the project. A renovation will always have a different price than a renovation with load-bearing work. Renovations and new construction will always have different prices. In my experience, new construction has always been less expensive than a renovation. Also, your home should be complete vacant while it is under renovations. If you are living in a property while it is being remodeled the price will be hired or some carriers might even decline coverage. This type of insurance is very important to obtain. Remember that your contractor may have workers comp and general liability but the contractor’s insurance does not cover what a builder’s risk policy will cover.

If you need to get an extension always get it before the expiration date of your policy. Most carriers will not renew a policy if it has already expired. If your policy expires before you get an extension you might have to get a brand new policy that will accept to cover with while the project has already started. This new policy will be more expensive that the original policy. I have seen this happen many times. Some carrier might even ask you for proof of why you need an extension.

To wrap up, you should always give the correct value of the structure to get the proper coverage. Do not try to over or under insure your property to save money or make money. Make sure that your home is vacant while the renovation is happening. Make sure that your contractors are insured and always ask for a certificate of insurance. Do not just take their word for it. If you are not a licensed contractor do not try to do the work yourself. This may result in no claim being paid because the work was not done by a license sub-contractor. Even though you might subcontract all the work you still do not know if it was done correctly. Leave it to a licensed contractor to do the sub-contracting. Always remember that there will be exclusions in your builder’s risk policy. You should always consult these exclusions with your agent. You can even have your agent send you a sample policy with the list of exclusions so that you may go over it from the comfort of your own home.