If you had any fun as a child, you liked to build tall things and destroy them. Whether plastic lego towers, castles made of sand, or a house of cards, what went up usually came down in one fell swoop. Playing at that level had little consequences and you probably didn't worry too much about leaving a few of your toys lying around unless you had to pick up the mess before dinner. Those structures were meant for limited use and you could easily build them again, sometimes even taller. You, a friend, or maybe a younger sibling were the only threats.
Fast forward to your current building project and the stakes have changed. You are just wanting to get from Point A to Point B and you want to get there without any accidents, disasters or perils effecting your property, and eventually the income earning potential from it. As a good property owner/landlord, you've insured you property with a solid investment property insurance in the form of a property and liability policy, but you need something to protect the construction on the way to getting that property renovated, rebuilt or constructed. It's good to know what protection you have in the form of Builder's Risk insurance to make sure what you are attempting to put up doesn't bring you down.
What Does Builder's Risk Protect Against?
In the process of your building project, you'll have materials on or waiting to be delivered to the property. Builder's Risk insurance can protect your structure in addition to providing replacement of materials on the property or materials waiting to be transported to the property. Protection is usually in force for natural perils like:
- Fire
- Windstorms
- Hail
- Lightning
Damage caused from human actions like theft, vandalism and vehicle/airplane negligence are also usually covered, along with explosions either caused and not caused by humans. Perils that are not often covered include (but definitely are not limited to):
- Acts of War
- Earthquake
- Employee Theft
- Water damage
The following are also not covered:
- accidents
- property of others
- tools and/or equipment
Who Needs This Coverage?
As the property owner, you or your business will need to carry the coverage, however, there are a number of ways a Builder's Risk policy can be supplemented to provide even more coverage, e.g., sewer and drain backup or debris removal. For added protection, many property owners require their contractors and subcontractors to carry their own policies.
You'll have to navigate your needs since no construction and reconstruction project are one-size-fits all. You'll want to understand the limits of your coverage.
How Long Does This Coverage Last?
When you begin the building process, for instance, when the shovels hit the dirt, actual cash value will be applied to the existing structure if any is in place. After you complete the renovations or construction and the inspections are finalized and the property habitable for use, any claim settlement shifts to replacement cost. This protects you once the work has been completed in the most comprehensive fashion.
Building projects are complex and usually involving a lot of moving part. The nature of construction and the nature of those doing construction involves risk. Throw in things outside of your control like natural perils and mischievous behavior (construction sites are often mischief magnets) and you quickly find out your simple construction project has the potential for more risk than you expected.
Don't start there. We're here to help guide you through what protection is appropriate for your project and we'll present you with a few options worth considering. Give us a call and we'll talk about your projects. Insurance For Texans, an independent insurance brokerage, helps property investors protect their investments and builds your insurance coverage solutions while you build your property investment income dream.
