If you’re about to have a home or house built, you might want to understand what builder’s risk insurance means and whether you need to have this risk insurance or not.
All the information you seek is here. In this post, we’ll give you a full detailed guide about Builder’s risk insurance.
Just read on as you learn all but, before we proceed, let’s understand what builder’s risk insurance actually means.
What is builder’s risk insurance?
Builder’s risk insurance is a policy or home construction insurance that’s purchased by home builders or contractors to protect your homes during the construction or renovation of a home.
Why this policy?
Well, having or carrying a builder’s risk insurance is important for you and your home because it protects your financial crisis in case there is damage or loss during the construction or renovation of your building.
Builder’s risk insurance protects a home under construction or during major renovation against theft of building materials, vandalism, fire outbreak that might destroy your built house, or in the case your home collapses and needs to be rebuilt. This policy is vital as it helps both home builders and homeowners to stay on their building budget.
However, have in mind that there is a slight difference between the homeowner’s insurance and the builder’s risk insurance.
What is the difference between home builder’s risk insurance and homeowners insurance.
As stated above, the builder’s risk insurance is meant to be carried during the time of the Construction or only for homes still under construction whereas Homeowners insurance is for completed homes. The homeowners carry this policy the whole time they live or reside In the home.
What does builder’s risk insurance cover?
Builder’s risk insurance covers your building while it is still under construction, it covers building tools or materials being used on the site during construction, and loss or damages resulting from explosion or fire, tornadoes, aircraft collision, vandalism, theft, etc. But does not cover loss or injuries caused by floods, earthquakes, war, employee theft, rust, damages due to poor or faulty design, etc.
Having a builder’s risk policy is essential. For instance, if your building collapses during construction because of poor design and someone is injured, you will have to provide a builder’s risk insurance coverage to your insurer to pay for the damages or loss.
However, understand that insuring a building that is under construction is different from insuring a home that is already built, as each requires different coverage. So, homeowners insurance protects the structure of your home and covers you in case someone is injured on your property or home.
Between a builder and homeowners who pay for the builder’s risk policy?
Well, some builders expect homeowners to purchase a builder’s risk policy before the construction begins. This is so that they don’t have to foot the bill for the cost of premiums.
So as a homeowner, it’s important to inquire or negotiate with your contractor to know if he does have coverage, the type of policy, and the limits of the policy.
Hence, there is no straightforward answer to the question of who covers the cost of a builder’s risk insurance between the home builders and property owners as both parties have to discuss and decide on who pays or carries the builder’s risk insurance.
Still, a homeowner needs to have or carry General liability insurance to protect both the builder and the homeowner.
What is the cost of builder’s risk insurance?
The cost of purchasing a builder’s risk insurance according to the current report is between 1% to 4% of your building budget though this percentage is based on some factors such as; the insurer company, the size of your building, type of project, the location of your house, materials to be used, and a lot more.
How long does risk policy last after purchase?
The duration of a builder’s risk policy varies depending on your insurance company and the policy plan you choose or paid for.
But generally, the builder’s risk insurance last for 9 to 12 months. But it can be renewed in case something goes wrong and the construction is delayed.
2 amazing benefits of having builder’s risk insurance.
Here is the reason why you need to carry or purchase a builder’s risk policy.
Support home investors.
It protects house or home investors from loss or damages that may occur during or after the construction of their estates.
Covers building materials.
It also covers the risks associated with construction site equipment such as tools and other building materials from a new home build to a major home renovation.
A builder’s risk insurance is designed to protect you and your home during a new home construction or renovation project.
As we are building or renovating our homes, vandals may strike, the building may collapse, or fire may break out destroying your building. Hence, homeowners or builders need to purchase or carry a builder’s risk policy to protect their finances if any anything goes during renovation or the construction of the new home, then your insurer can pay back for the loss or damages done during the building.
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