How to Know What's Covered by Builders Risk Insurance

Posted by Anonymous , 9/4/2007 Tags:KnowCoveredBuildersRiskInsurance
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How to Know What's Covered by Builders Risk Insurance

Introduction

Builders Risk Insurance protects buildings, materials and tools during construction. Builders buy policies to protect their interests in buildings, materials and tools in case of disaster. Property owners may have interests covered by the policy. Builders Risk Insurance is specific to each project and should be reviewed by the builder and the property owner.

Instructions

Difficulty: Challenging

Building Equipment, Materials and Supplies

Steps

1

Step One

Verify construction materials, equipment, tools and other supplies are insured in storage, in transit and on-site. Coverage should protect against theft, fire, weather, sink holes and water damage including sewage back up and seepage. Fire Department service charges should also be covered.
2

Step Two

Confirm your materials are covered installed or uninstalled.
3

Step Three

Ensure equipment loaned to others, borrowed, rented or newly acquired is insured under the policy. Clarify if scaffolding and fences are insured.
4

Step Four

Make sure the coverage is for replacement costs. Reimbursement for rental costs should be provided in the policy.
5

Step Five

Evaluate the policy to ascertain coverage for temporary structures, foundations and debris removal and excavation sites.
6

Step Six

Review provisions in the policy that limit coverage due to damages only arising from specified events. The policy should include an adequate general liability provision that includes occurrences apart from the specified events.

General Insurance Provisions

Steps

1

Step One

Check for provisions covering pollution found on-site or inadvertently caused by the contractor. The owner and the builder should be aware of any remedies and costs covered.
2

Step Two

Ensure losses caused by changes in state or local laws are covered.
3

Step Three

Study the policy to verify that any damages caused by design errors or faulty workmanship are insured. Redesign costs should be included in the policy. Errors and Omission coverage, which protects against errors made by the builder or any sub contractors, should be included in the policy, and all sub contractors should be specifically identified.
4

Step Four

Confirm the total coverage is adequate to cover the cost of the structure and improvements. Conflicts between any policies held by the owner and held by the builder should be expressly resolved. The owner and any lien holders may need to be named as insured in the Builders Risk policy. These issues should be discussed with an insurance professional.
5

Step Five

Determine if coverage ends upon completion and acceptance by the owner or when the work is completed. Cessation of coverage should be unambiguous and in compliance with all other obligations.

Overall Tips & Warnings

  • Flood and earthquake coverage is available and should be purchased if the project is at risk for these natural occurrences.
  • Renewal of the policy should be preceded by at least a 60-day notice.
  • Structures over 75 years old may require additional documentation for insurance to be issued.
  • Structures in coastal areas may present insurance difficulties.
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