Builders Risk - Residential Construction
Builders Risk is a specialized type of property insurance policy designed for buildings under construction. Sometimes this policy type is called 'course of construction'. This can be written as an individual policy or might be endorsed onto a current home insurance policy if the home is being remodeled.
A home under construction can be a dangerous place. Contractors roaming around using power tools , unsecured materials being cut and moved around creates an environment where injuries and/or property damage is much more likely to occur. Therefore a standard home insurance policy is not designed to cover this type of risk and a homeowner can experience an uninsured loss, if they don't purchase the correct insurance policy type before construction begins.
New Home Construction - Ground Up
A Builders Risk policy is an absolute necessity for a 'new build' residence and generally covers structures as well as uninstalled materials, supplies and equipment while they are on site, in transit or temporarily stored in other locations waiting to be delivered to the jobsite. Other optional coverage can also be added such as: soft costs, scaffolding, debris removal and costs associated with construction delays.
A Premises Liability policy should also be purchased (can sometimes be endorsed on the Builders Risk) to cover third party losses on a construction site such as: injuries to third parties, pollution spills and damage to other people's property.
These policies can be purchased by the home owner or the General Contractor according to their individual contract which can also dictate if the other party should be added as an additional insured on the policy, which we always recommend.
Home Under Renovation - Minor Remodel
In general, if you are just repainting and replacing carpet and maybe installing a cabinet or two, a builders risk policy might not be necessary. Contact your home insurance agent before starting the work, just to find out what your carrier 'theshold' is for remodeling. This is the only way to make sure you're covered in a claim.
Home Under Renovation - Major Remodel
In general, if your remodeling project includes any electrical or plumbing permits to be pulled, or if you are adding or moving any walls, adding square footage or the cost of your renovations exceeds 10% of your home value...then you need to purchase a builders risk policy. (please consult your insurance agent before starting any renovation to your home.)You can purchase a 3 month, 6 month or 12 month policy and get extensions with underwriting approval if your project takes longer than expected (which they always do!)
A few other Tips about Home Renovations and Construction
From the view of the insurance carrier, a home that is being remodeled is a much different risk for than a home that is occupied in the usual way; ie ...residents being home most of the time, going about their daily lives and occasionally having a visitor stop by. Some home policies allow an endorsement (for an extra charge) to be added to the policy which basically recognizes this higher risk and will provide liability and property coverage while the home is under renovations.
Do to the inconvenience of living in a home being remodeled; often times the residents prefer to move out of the home during this time. This in turn can change the 'occupancy type' of the home to 'vacant'. When a home is deemed 'vacant' by a claims adjuster, this can trigger a restriction in coverage. Some policies will void coverage for vandalism, personal property coverage, frozen pipes and glass coverage. Every policy is different so it is highly recommended that you contact your agent before starting a home remodeling project and discuss the extent of the renovations and find out the thresholds of their home insurance policy to insure they have coverage in the event of a claim while their home is being renovated.
On a remodel, try to get 'replacement' valuation on the existing structure if you can. Most carriers will value the existing structure at depreciated and the new construction as 'replacement cost' which is better.
Make sure ALL contractors ..AND … ALL subcontractors carry a General Liability Policy which includes 'ongoing operations' and 'products completed' coverage.
Make sure their General Liability policy lists you (the home owner) as an 'additional insured' AND
Make sure they present to a valid certificate of insurance which shows all this listed on the certificate...before they start work on your project. This is the only way to protect your investment from their actions that cause injury or property damage and covers 'faulty workmanship'. For example a plumber installs a new sink during your remodel. Several days later the pipe springs a leak and damages the wood flooring. If you have the contractors certificate of insurance on hand, you can call his insurance carrier and file a claim under his policy to repair the damage. The contractors faulty workmanship caused a loss to your property and his General Liability policy will cover it under his 'completed operations' coverage. But if you don't have a certificate of insurance prior to the loss, you might have a hard time getting the contractor to file a claim after a loss occurs.
As soon as the renovation is complete, contact your agent and discuss the changes to your home. You might need to increase the amount of insurance to replace your home since the reconstruction value has now changed.
At Denver West Insurance Brokers, this is the type of advice we provide to clients all the time. Give us a call today! We help clients in the Denver are and all around the state of Colorado everyday. Let one of our licensed agents make sure you have the correct insurance coverage during a remodel or construction of a new home.