There are a lot of risks involved when a building is being constructed. A building is vulnerable to fire, can be damaged by high winds or undergo any other major force damage. As per the law, when a property is under construction, or when any modifications are happening on the land, that land is the property of the owner, the titleholder. This means that any loss incurred has to be borne by the owner. Builder’s risk insurance protects the builders from such losses.
builders risk insurance is a property insurance that indemnifies against damage to buildings when the construction is still going on. It is a coverage that protects the builder or the company in case there is damage to materials, fixtures or equipment used during construction or restructuring of a building after you buy a protection plan for the same.
builders risk insurance cover provides coverage in case of following events occur:
- Fire breakouts
- Heavy winds
- Theft in the building
- Heavy thunder and lightning
- Gas or acid explosion
- Hail storms
- Damage by vehicles
In case the building collapses, there is limited coverage available in such risk insurances.
One must read the terms and conditions carefully before purchasing coverage and be clear about what is covered and what is not. Add on covers in the builders risk insurance policy
Along with the above mentioned events covered, one can additionally purchase add on covers to cover a few other occurrences that might damage the building and needs an insurance cover:
- Damage during clearing and removing debris
- Damage to nearby property during construction that is not a part of your contract
- Extended maintenance cover to cover any accidental damage that might occur during a post-completion visit to property/building
- Cover against any amount incurred for rectifying original defects or faults during construction.
- Third-party liability
- Terrorist attacks
Case study for builders risk insurance cover
A construction company, say ABC Pvt. Ltd. started a commercial complex building project in their city. They take the builders’ risk insurance cover before starting the project. They do so to cover all the perils that can probably be the cause of damage during construction.
When the building was almost five floors done, a massive hailstorm struck the site. One of the recently built walls collapsed because of the heavy rain and hail storm. The builder incurred damages worth $8000 and a part of the building will have to be rebuilt.
In the collapse, a car, not owned by the owner, got damaged too. This meant another expense of $5000 for the car repair.
The builder now files a claim with the insurance company. The insurance company agreed to reimburse $8000 but refused to pay for the car as they had not purchased an add on cover for third party claim.
This is just one situation where builders face such losses. You must look up and compare all builders risk insurances available in the market to buy the one that suits you best.