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Builders Risk Update: What You Need to Know About Insurance for Renovations and Construction

Alright folks, ready for some valuable insights on builders risk, vacant properties, and contractor insurance? Whether you’re planning a small renovation or a big construction project, insurance is crucial to protecting your investment. Let’s dive into the details.

Understanding Your Project

First things first: What’s your project? The type and scope of work dictate the insurance you’ll need. Consider these factors:

  • Project Type: Is it a quick cosmetic update or a complete renovation?
  • Scope of Work: Are you painting and laying down carpet, or are you moving walls and working on the foundation?
  • Timeline and Budget: How long will the work take, and how much will it cost?

Types of Insurance Policies

Depending on your project, you might need different types of insurance:

Quick Cosmetic Updates

For simple jobs like painting and carpet installations, a vacant dwelling policy might be enough. These are flexible and can be paid on a month-to-month basis.

Interior Renovations

If you’re doing a bigger interior renovation without structural changes, consider a builders risk policy. This covers more extensive work and might be necessary if you’re spending more time and money on the project.

Structural Changes

For projects involving structural changes, roof work, or foundation repairs, you’ll need a comprehensive builders risk policy that includes existing structures. This is because most insurance companies don’t want to write foundation coverage while it’s under construction.

New Builds or Major Renovations

For complete teardowns and new builds, or significant renovations involving both interior and exterior changes, a full builders risk policy is mandatory. This ensures coverage for all aspects of the construction process.

Monthly, Fully Earned, or Pro-Rated Policies?

Choosing the right payment structure for your policy is essential. Here’s a quick breakdown:

  • Fully Earned Policies: You pay a fixed amount—like $600 upfront—and won’t get any of it back, even if you cancel early.
  • Pro-Rated or Month-to-Month Policies: These might seem more expensive initially, but you get refunds if you cancel early. It’s flexible and can save money in the long run.

Dealing with Contractors and General Liability

Contractor Insurance

Your contractors and general contractors (GCs) should carry their own insurance. Here��s why:

  • Insurance companies exclude your contractors’ work from your policy because it’s their responsibility to cover their own employees and subcontractors.
  • Always ensure that your contractors name you as an additional interest on their insurance policies. This means you’ll be notified if their policy is canceled or there are any changes.

Contract Clauses

Make sure your contract with any contractor includes:

  • Hold Harmless and Indemnification Clauses: Protects you from being liable for accidents or issues caused by your contractors.
  • Additional Insured Status: You must appear on their insurance certificate (COI or Dec page), ensuring you’re covered.

Extensions and Endorsements

Some policies allow for extensions beyond the initial period, while others don’t. Be conservative with your timeline estimates to avoid problems if your project takes longer than expected. Extending a policy is usually cheaper than buying a new one, so plan accordingly.

Wrap-up

Securing the right insurance for your construction or renovation project is vital to safeguarding your investment. By understanding your project’s type, scope, and budget, you can select the appropriate insurance policy to cover potential risks. Always ensure that your contractors have their own insurance and that you are listed as an additional interest to protect yourself further. 

Thoughtfully consider your policy’s payment structure and plan for possible extensions to avoid unexpected costs. With the right coverage in place, you can proceed with your project confidently, knowing you’re well-protected against unforeseen issues.

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