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What is covered in Builder’s Risk Insurance?

Builders-Risk-InsuranceBuilder’s risk insurance is a form of property insurance that covers a building that is still in the construction process. This type of insurance also covers the materials that will be installed into the building or still being transported to the job site.

What will the builder’s risk insurance pay for? Ideally, this insurance will pay for damage until the coverage limit. This coverage limit should reflect the overall completed value of the whole structure, except for the land value. As such, the entire budget for the construction is the best basis to determine the insurance limit.

Policies for builder’s risk insurance can be written in three-, six- or twelve-month terms. However, if the project does not get completed by the time the policy ends, the policy can still be extended. Ever this extension is only allowed as a one-time extension.

Builder’s Risk Insurance Coverage

The builder’s risk policy provides compensation for damage caused by a variety of events on the insured structure or building. Most policies cover damage caused by fire, wind, theft, lightning, hail, explosion, vandalism and vehicles.

Although exclusions can vary from one insurance policy to another, it is very likely that water damage, earthquake, employee theft, war, government action and other are found in the policy. However, you must remember that these exclusions may be added in the policies.

There are situations when extensions of the coverage are provided, but these may be limited. The common coverage extensions include scaffolding, a property in transit, property in temporary storage, debris removal, fire department service charges, sewer and drain backup and loss of valuable papers.

Additional Important Information

Here are other important pieces of information that you have to know. Insurance policies do not include damage to properties of others and damage to tools and equipment not stated in the terms. Thus, subcontractors need to have their own insurance. Builder’s risk insurance rarely covers liability as well as accidents on the job site.

If a project includes renovations on an existing building, the property insurance of the owner could cover the new construction work. Thus, simple renovations do not require a builder’s risk insurance. So, new buildings built on empty lots necessitate the purchase of a builder’s risk policy on the part of the contractor.

Generally, coverage of the insurance ends when the construction is completed or when the building is occupied. Some public projects could require contractors to get third party surety bonds. One of the surety bonds required of municipal projects is a performance bond for most New Jersey community projects. Further, a payment bond is also one of the surety bonds a Philadelphia public construction project that building owners might ask for.

Usually, the owner of the building requests builders risk insurance in Bucks County. But then again, some contractor’s license bonds in Montgomery County will do if both parties can come to an agreement. It is really advised that the owner of the property ask the general contractor to present a copy of the documentation as proof that business liability insurance in Philadelphia was secured during the bidding process. This prevents delays or surprises when the job is awarded.

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