Builder’s Risk Myth vs. Fact

Recently, we talked about all the builder’s risk facts and what you should know when talking about this insurance coverage. However, there are a few questions and myths that often come up – ones we didn’t talk about. 

Today we wanted to talk about these myths so that you can take a full understanding of your protection to the job site. There’s nothing worse than having insurance only to find out it’s not what you need when something goes wrong.

Myth: Builder’s Risk Covers the Project from Start to Finish

Fact: This vague statement isn’t wrong… but can be misleading. Builder’s risk insurance covers your materials, tools, temporary structures, and the site during the course of construction. That’s why it’s known as “course of construction insurance.” However, the builder’s risk coverage doesn’t cover anything off-site or after it changes hands or people move in. 

Knowing what your specific policy’s contract terms will be vital in risk management planning. Though all policies will cover the hard and soft costs associated with a delay, your policy might have specific exclusions that make it unique or specific inclusions that others don’t have. Always read the whole policy before you sign. 

Myth: *Everything* On-site is Covered

Fact: Almost everything on-site is covered with a normal policy. However, extras must be taken out to cover everything in totality. If you want your insurance company to cover your tractor or bulldozer, for example, then you must take out an equipment floater in addition to your policy. However, things like materials, tools, temporary structures, and plans are covered with most normal policies. 

Myth: It’s Never Too Late to Get Builder’s Risk

Fact: There are many types of insurance that you can get after something has started. However, the builder’s risk isn’t one of them. General contractors looking to get started on a project should obtain builder’s risk insurance before the start of the construction project. In addition, make sure you have all the insurable interests in the coverage form before the construction site becomes active. 

However, if you have a change order after the project has started, your policy will change as well. Think about this insurance policy like the clay needed to make a bowl. You can’t make a bowl without already having clay in your workshop. However, if you decide to change the shape of the bowl, you can easily use more or less clay then you had planned before. 

Myth: I’ll Just Use General Liability Insurance Instead

Fact: There is no equivalent insurance to builder’s risk insurance. That’s why it’s often listed as a prerequisite to starting a construction job by the property owner. While your commercial property insurance might cover the property on a day-to-day basis, it doesn’t work the same when a project starts. Only the builder’s risk can help you during a major construction project. 

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