Ask the Expert
Q: We're building a home - do I need to insure it before it's completed?
A: Yes. If you're working with a builder, you should check with him to see if he has Builder's Risk insurance. If he doesn't or you're building a home yourself and hiring your own contractors, you'll need to get the coverage yourself. Either way, below is information regarding Builders' Risk insurance that you should know.
Q: We're building a home - do I need to insure it before it's completed?
A: Yes. If you're working with a builder, you should check with him to see if he has Builder's Risk insurance. If he doesn't or you're building a home yourself and hiring your own contractors, you'll need to get the coverage yourself. Either way, below is information regarding Builders' Risk insurance that you should know.
Builders' Risk Insurance Defined
This is a form of property insurance that covers property owners and builders for projects under construction, renovation or repair. It is similar to Building and Personal Property coverage with the only difference being that this policy is used to cover buildings during the course of construction. Often, many banks require evidence of Builders' Risk insurance prior to closing a construction loan.
Coverage Details
Builders' Risk policies provide coverage on an "all risk" basis including theft and vandalism, accidental losses, damage, or destruction of property for which the insured has an insurable interest. The coverage can include building materials destined to become part of the final building or structure as well as the property while it may be in transit, at temporary storage locations and while on the job site. Even contractors can be named as an additional insured if requested. Note that the limit of insurance may equal the full value of the project. Where only a limited percentage of the full project may be exposed to a single loss, coverage may be available for loss limit.
Remember, the contractor's equipment and tools are not covered and shall be specifically insured by the contractor. And, Builders' Risk policies do not cover losses occurring before construction begins or after completion of construction. Construction must be in progress for coverage to exist. When the project is finished, an appraisal is conducted to update any value changes.
Additional Options to Consider
Optional coverage can be requested to include "soft cost" not directly related to construction (financial cost, additional interest expense, leasing and marketing expense, legal and accounting expense and miscellaneous carrying cost) and delayed opening loss of income if a delay in completion results in loss of revenue. Both flood and quake (where needed) coverage are also available upon request.
Make sure you have the right coverage before you start building. With so many players and so many opportunities for loss, having sufficient insurance from the beginning lets you sleep more soundly at night (or, as well as you can while building a new house)!
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