Contractors or builders can insure their construction projects by buying what is known as builders risk insurance policy. Construction insurance policies are meant to protect structures being built or renovated by insuring them against all conceivable risk or threat that could become liable during the construction period. Once the construction is finished, the policy also ends. Builders Risk Insurance policies are flexible and can be tailored to meet the demands of the construction project. Since every construction project varies, construction insurance policies are structured differently. There are four ways on how a Builders Insurance policy is structured.
- Single Shot
With this structure, separate policies are issued for each house being built. There is usually a $350 minimum premium. If the house is completed before the policy ends, there is no refund handed out. The builder must provide all the pertinent information (such as location, square footage, total cost, etc.) before the policy is delivered. This type of construction insurance policy is recommended for builders in custom construction with high values or those constructing five or fewer homes per year The Single Shot structure is not for volume builders.Disadvantages: Builders can forget to communicate with his agent to have the policy issued. This demands more and better communication between the insurance agent and the builder. The builder needs to provide all the pertinent information to the agent each time so to complete the application and secure the policy. If the policy is not secured, there will be no coverage and rates are usually higher.
- Monthly Reporting Form (Monthly Rate)
Every month, the builder will complete a report citing his existing inventory for the previous month. The builder will apply the rate to the total inventory and computes his monthly premium charge. The builder will send a check along with the monthly report to the insurance company. When a house is completed or sold, it will not be included on the next monthly report. The rate of this policy structure is less. If the builder completes a house in less than 5 months, he will pay less. Builders are not required to communicate with their agents when a new construction is started. Volume builders should have this structure as they can turn over houses quickly.Disadvantages: Inventories each month can be very demanding. Sometimes, remembering to list houses being constructed can be a problem.
- Monthly Reporting Form (Annual Rate)
The monthly report in this structure will contain all new starts for the prior month. The builder will apply the rate to the total amount of all new starts and compute his monthly premium charge. Just like the previous structure, the builder will send his payment together with the completed report. Since the new starts are covered for 1 year, it is not required that they are included in the report, unless they are not completed by the end of the 12-month term. This policy is best for those builders who usually spend more than six months in completing their project. Only new starts are cited in the report monthly, and the builder doesn’t need to contact his agent from time to time.Disadvantages: The builders still need to accomplish reports every month.
- Blanket Annual Deposit
Among all the policy structure, this is the easiest for builders. A builder will estimate the finished value of the number of new starts expected for the next 12 months plus homes that will be in existing inventory for more than one year. The insurance company will apply the rate of total projected annual values. Many insurance providers offer a payment plan in this type of policy. At the end of the policy period, the policy is subjected to audit. The audit will determine if the builder started more houses than expected or fewer than the anticipated number. With this structure, the builder has fewer administrative hassles.
The construction project is almost done when the building beside your project gutted it out causing damage to the property. You know you will lose money and potential income with the damage caused by the fire. However, if the project is covered by builders risk insurance, you can easily file a property claim to reimburse the damages.
Builders risk insurance is a form of property insurance that is used to look after the property owner and the contractor against damages and losses due to fire, accidents, theft, or vandalism, while the building or any property is under construction, renovation, or repair.
There are four basic types of policies for builders risk insurance — the monthly reporting form (Monthly Rate), the Monthly Reporting Form – Annual Rate, the Blank Annual Deposit, and the Single Shot policy.
Among the four types of builders risk insurance policies, property owners and contractors choose and recommend Monthly Reporting Form (Monthly Rate) over other types. This type of builder’s risks insurance policy is perfect for general contractors who are doing several projects at the same time because of its lower rates and less premium payment if the project is completed in less than five months.
When using a monthly rate reporting form, the contractor completes a report of his entire inventory before the end of each month and applies the value to the total cost of inventory. Afterwards, the monthly premium charge is computed before sending the check to the insurance broker together with the monthly report.
However, it is tedious due to the maintenance of inventory each month. Moreover, the contractor has to keep a record of each progress in the project. Additionally, when the project is completed, it is no longer included in the list of the next monthly report.
First and foremost a builder’s risk insurance policy protects the home builder or contractor, not the home owner. This insurance is temporary – usually for the term of the construction effort or until the home owner accepts the home and occupies it. This insurance coverage protects the contractor from theft, weather and other “natural acts,” vandalism, etc. Different carriers and policies cover different hazards, so make sure it covers everything needed – including a reasonable profit! Premiums are set by the value of the property(s), so don’t overestimate.
Types of builder risk insurance policies:
- Single Shot – a policy for one home. Has the least expensive premium.
- Monthly or Annual Rate/Monthly Report – a policy that covers all the builder’s inventory, is paid for monthly or annually, and requires a monthly report to the carrier
- Blanket Annual Deposit – premium based on estimated value of inventory and anticipated starts in next 12 months.
So, you’ve “bit the bullet”, so to speak, and you’ve decided to invest in your next big investment: your house. Did you know that Builder’s Risk insurance can help with that? If you are a homeowner, monthly builders risk insurance may work best for you. With monthly builders risk insurance, you will be required to keep track of the materials and tools you use monthly, and report on them. This is the only downside to purchasing builder’s risk insurance monthly. However, by keeping track of all the details, you will find that all of the materials you are putting forward towards your house are protected and your house, your newest, biggest investment, is as well.
When it comes to builders risk insurance and selecting a policy there is a lot of information you should know. First keep in mind that there are many different types of builders risk insurance for you to choose from. One of the easiest is called the blanket annual deposit.
With this policy you are basing your insurance on the estimated amount of new business for the year. You can also include the homes that will be in inventory more than twelve months. The insurance company will provide you a rate based on this information.
The cool part about this is that most construction insurance companies will allow you to pay them monthly for this type of policy. This has a direct benefit to a small company because it is not all due in a lump sum payment. Spreading the bill out allows you to collect money and pay your insurance payment every month. There is an audit with this type of service which means if you build more houses you will have to pay the insurance company more. However, for many builders this is still an awesome plan.
Vandals often target home construction sites and often target them for material theft or for malicious destruction. When this happens, replacement and repair costs fall on the builder. Similarly, storms and fire can damage or destroy homes under construction. Because of these risks, every builder and contractor should carry builders risk insurance. This temporary property insurance protects builders during construction.
Builders should have risk insurance in place for a project in time for the first delivery of supplies to the construction site. With a policy in place, contractors have protection if they disappear. Risk insurance policies vary among insurers, so builders must make sure their coverage includes loss of unused material and the collapse of partially-completed buildings.
Some contractors make the mistake of relying on homeowners to buy builders risk insurance only to find out that they either bought inadequate coverage or forgot to buy it altogether. When this happens, builders wish they bought the insurance themselves because they suffer significant loss.
You may not have knowledge about the kind of builders risk insurance to apply for to cover your property that is under construction by your builder. It is important to inquire from your contractor insurance agent who will guide you on the appropriate cover to take for this project. In addition to that, you will have to estimate the charges of that policy and see if it will suit you.
Also let your builder risk insurance broker understand the kind of home you want to construct so that he can advise you more to gather enough information. Make sure you ask your builder if they have builders risk insurance coverage if not make sure they get a risk insurance quote from a qualified insurance agent.
All builders and general contractors should get builders risk insurance coverage regardless of which trade they are in. Whether they are home builders or commercial building contractors, a construction insurance policy can protect their interest and investments. Even with the necessary precautions and measures implemented, a construction site is still vulnerable to unforeseen risks and threats. Builders risk coverage will protect not only construction workers who sustain injuries due to unexpected circumstances, but also cover tool, materials, and equipment that get damaged or lost. Most insurance companies providing construction insurance cover theft, fire, accidents, and some natural disaster that might cause troubles in a construction site.
However, many builders hesitate to buy builders risk insurance policy because they think it will rip them off of thousands of dollars. Contrary to this, money savings are possible when you get construction insurance.
Here are four tips to help you save money:
- When getting a quote, never settle on the first policy offer you receive. Obtain multiple quotes so you have more options to examine and choose from. Three quotes will be enough to give you a clear picture of the costs involved in the purchase.
- Make sure to have a background check on the insurance provider you are offering you the quotes. Your coverage is useless if it doesn’t pay out when the need arises. Reputable insurance companies should have a strong financial stability and first-class customer service.
- Understand and study your policy and its coverage. Make sure you understand the fine print and purchase accordingly.
- Don’t unnecessarily overstate the values to insure in order not to have a significantly higher premium.
Builders Risk Insurance will protect you and your property while throughout construction. With this type of insurance, your investment will be protected and help the process of building your dream house or building doesn’t turn into a nightmare.
Lets face it, today just about anything we do in the professional field carries risk. Professional positions such as computer programmers, web developers and designers all carry risks. The smallest accident that causes an error can become a massive liability. It’s not enough to have a general liability policy though, what you need to understand is that there are many risks that must be covered in a different type of policy.
For IT techs and other technology professionals it is recommended that you get what is called E&O Professional Liability Indemnity Insurance to be protected from negligence or a claim from a client or even your employer. People are now hiring people who are experienced in information technology to babysit and update their Facebook/MySpace pages. People can often get extremely upset if something goes wrong with one of these pages for them. It does not even matter at times whether the IT professional.
People can get so offended if something happens to their MySpace or Facebook page that they can threaten litigation. This litigation is why many IT professionals need to carry business liability technology insurance. MySpace is a multi-million dollar company and some people take it very seriously on the basis of simple networking alone. The destruction or even partial loss of time on their MySpace page can cost people money.
An information technology professional who has been hired to setup an e-mail server for an energy consulting should carry some sort of professional liability technology insurance coverage. There can be a lot of things which could go wrong with e-mail servers when they are first activated or put into place. The IT professionals to stay on top of this situation or otherwise you will get blamed for the issues whether it is likely your fault for the mishaps or not.
The energy consulting firm may even get so upset about the errors and omissions that they bring litigation against the IT professional. In a state such as North Carolina where there hasn’t been strong tort reform for example, these lawsuits can be extremely costly. This is why an IT professional would be so smart to carry business liability insurance in North Carolina or any state for that matter.
Some states such as Mississippi have enacted strong tort reform measures, but these would just limit punitive damage awards and not actually prevent you from getting sued. So even in states where tort reform has been enacted an information technology professional should still carry technology liability insurance. It is a hope of mine that they will be able to find this insurance at an affordable rate.