What Is Construction Insurance?
Construction insurance is a form of insurance that is specifically intended to cover buildings that are under construction. It might seem strange to buy insurance on a home that is not yet constructed, but there is a lot that can go wrong during the building process. Theft, vandalism, and arson are the most extreme risks, but they are by no means the only risks. This type of insurance is sometimes called “builder’s risk insurance.”
In most instances, these are short-term policies lasting from nine to twelve months. Of course, you can always renew your policy, but insurance companies tend to look upon this with suspicious, as it could indicate that you are not living up to your obligations. in many ways, you could describe construction insurance as risk management.
This type of policy will normally cover the entire construction site, as well as any tools and materials that happen to be there. It is meant to guard against accidents of every sort, from lightning and hail to terrorism and war.
Do You Need Construction Insurance?
Obviously, this sort of insurance is not necessary for someone who is not in the process of constructing a home. As for those who are, this kind of insurance is extremely necessary. Think about how many different workers have been at your worksite. Now think about how many of them smoke cigarettes. This creates a risk of fire that is admittedly small but present nonetheless.
More to the point, groups of delinquents and criminals often like to visit homes that are under construction, using them as a meeting place to sell drugs or as party spots. However, a few surveillance cameras can defeat this threat. The real danger comes from theft. As you can see from this report, theft from construction sites is a very common occurrence.
Why do people steal from construction sites? Because there are often valuable items that they can acquire. Many criminals are known to steal large amounts of scrap metal, and neither they nor the scrap yards are particularly picky about its place of origin. Even worse, some construction sites might have dangerous substances like explosives or thermite, and these are things that you definitely do not want falling into the hands of criminals.
Thankfully, you may not have to shell out for construction insurance. No one needs another bill to pay, and you can avoid this one if your contractor is fully insured. The law only requires a certain level of coverage, and this will vary by state. Always ask your contractor about their insurance, and make sure to get detailed information.
Ask them which insurance company they use, how much they pay, and how much their insurance will cover. Don’t be shy of asking these things because you have a right to know. If they dodge the question or get irritated, you might want to find someone else. Always make sure that you know who is ensuring your project and how much damage they will cover.
7 Things To Consider When Buying Construction Insurance
- 1. Make sure to find a broker who is experienced in these matters. Use the knowledge that you have gained so far to quiz them and see how much they know.
- 2. Make sure to get a level of coverage that is proportionate to your risk.
- 3. Make sure to find out the exact date at which the policy takes effect.
- 4. Make sure you understand exactly when the policy will expire
- 5. Make sure that you know the extent of your coverage on all matters
- 6. Read the policy carefully. Read every single word, including the fine print.
- 7. Always check with your contractor to see what kind of insurance they may have.
How Does This Relate To Your Homeowner’s Insurance?
You should have a good homeowner’s insurance policy before you even think about constructing a new home. Even if you don’t need construction insurance, this is essential. However, construction insurance does not replace your homeowner’s insurance. In order to be covered against all of the likely issues, you will need both of these policies. In the context of construction, homeowners insurance is most likely to be needed if you are sued for some reason.
How Expensive Is Construction Insurance?
This kind of insurance usually isn’t cheap, because the insurance companies know those home builders can afford to pay. Insurance will typically account for 1-4 percent of the construction budget. When you consider how expensive the average construction project is, that 1-4% can translate into quite a few dollars.
Can I Still Use This Insurance Once My Home Is Built?
No, construction insurance becomes completely useless on the day that your home is officially completed. However, it is usually possible to convert your policy into a standard home insurance plan once its term has expired.
What About Temporary Structures Like Scaffolding? Are They Covered?
Under most policies, temporary structures assembled on the work site are not covered. However, it is fully possible to upgrade your policy in such a way that it will cover temporary structures. Consult with your insurance company to see if this is an option for you.
While you probably don’t want to deal with another expense in relation to your construction project, this one is just unavoidable. A worker could get injured, or a person could wander onto the site and hurt themselves on a sharp tool, or any number of things.
It is incredibly hard to predict disaster, and that’s why insurance of this kind of so indispensable for any home builder, whether professional or one-time. We hope that you have enjoyed this article and that we have given you the knowledge that you needed. Please feel free to fill out the contact form below so that we can continue to keep you informed.