Builders risk insurance, also known as course of construction insurance, is a vital part of the construction or renovation of any building. Given the inherent danger of construction sites, ensuring you have the proper insurance set up can end up saving you plenty of money in the long run.
Actually a specialized type of commercial property insurance, builders risk insurance is often available either as a supplemental type of insurance, or as a self contained policy.
Course of construction insurance is unlike most other types of insurance in that the value of the property is almost nothing at the start and only reaches its full amount once the construction is completed.
But how can you tell if you have the right amount of insurance for the job you’re doing? There are lots of important factors to consider, and in this article we’ll be taking a look at everything you need to know about builder’s risk insurance.
How do you calculate the builder’s risk premium?
Premiums for builder’s risk insurance are governed by a number of factors that have to do with the value of the property, such as:
- The length of time the project will take to complete
- The total cost of the project
- The location of the project
- The total area of the construction site
- Amount of coverage
- How much experience and expertise those involved in the project have
- The overall quality of the building materials used in the construction
- Certain logistical issues, such as where the construction materials are being stored
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What is the average cost of a builder’s risk insurance?
While every policy is different based on factors such as the ones mentioned above, builder’s risk insurance typically comes out to anywhere from about $40 to $80 per month on a standard one to two million dollar policy.
While this is quite a large spread, it’s important to remember that how to calculate a builder’s risk insurance can be complicated by the fact that it is a unique type of policy that is affected by a number of multiple different factors, as mentioned above.
What percentage of the completed value is a builder’s risk policy limits based on?
A common calculation is that you should expect your course of construction insurance policy to be anywhere from one to four percent of your total construction costs.
Compared to the cost of what could happen without the protection of builder’s risk insurance, this relatively small cost can mean the difference between having to pay out of pocket for anything potentially disastrous that may happen to your construction site.
What is covered by the builder’s risk policy?
There are a number of benefits to making sure you have a good builders risk policy in place, such as the coverage of:
- The loss or destruction of the permanent structure that is being built, or any temporary structures necessary for the construction of the primary building, whether from fire, vandalism or weather damage.
- The theft of anything from the construction site
Related: What Is Builder’s Risk Insurance
Who should pay for builder’s risk insurance?
While the course of construction insurance is generally expected to be paid by the property owner, oftentimes it can depend on the unique construction project at hand.
For instance, the insurance premiums for a builder’s risk insurance policy are sometimes built directly into the builder’s contract, and thus must be provided by the actual builder.
However, if you’re planning on performing some of your own home building projects, it’s up to you to make sure you have the builder’s risk insurance in place before you head to the hardware store.
For instance, if you’re planning on redoing your garage roof, you’re solely responsible for ensuring you have the course of construction insurance in place before you get your ladder out.
Making sure you have a proper builder’s risk insurance policy in place can end up saving you from having to pay out of pocket if something goes wrong during the course of your construction project.
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