The warm weather of spring sets off many thoughts regarding winter repairs or updates to jobs that were not finished as winter set in, even remodeling and new construction projects. When planning these projects, insurance is not factored in unless the construction loan has to be addressed. At such a time, too often only the basic coverage or premium cost is the only consideration. Factoring in only basic builder’s risk of fire, wind and extended coverage may have you thinking that your loan is fully covered.”
There are basically two types of builder’s risk needed at such a time. These policies are usually written for one year at a time. Some premium cost may be recouped once the project is completed and the policy is canceled, because at that time the structure should be covered under either your home, or farm and ranch policy. If using a contractor, even though the builder’s risk should be in the owner’s name, be sure to receive from the contractor a certificate of insurance for not only liability, but for workman compensation, as well as sub-contractors. Also, if needed endorsements are left off your builder’s risk, such as theft of materials or tools left at the construction site, it could leave you paying your construction loan for someone else using your materials. In the same thought, what about equipment rented or borrowed on your construction site?
In these cases, builder’s risk coverage can normally come in two different ways. One is a policy which covers specifically listed losses. Second is a policy which includes everything other than specifically excluded items. The limit of coverage allowed is normally the value of the completed project. Events which can trigger an early end to coverage include; when the owner takes possession, occupancy after a specific period, if the project is idle for 60 days, or 90 days have passed since the completion of construction. The owner will want to be the named insured on the policy to avoid the question as to who is insured when a claim occurs. In that way, the owner files any claim and receives settlement and can reimburse the builder for damages he possible may have. Otherwise, the builder files claim and the property owner is to collect from the builder or contractor.
Then there is self-build insurance, where the property owner is acting as contractor. This type of policy can include or provide financial compensation for setbacks and problems that may occur during the project. This policy can also often cover materials related to the project with a wide range of protections by endorsement usually to protect both items and any liabilities.
Every need at the time of construction can be very different depending on factors of size, location and owner’s needs and plans of use.
Chet E. Caldwell (Left) and Mickey Mace (Right) are agents with American National Insurance. Caldwell is located in Fayetteville, Ark. Mace is located in Booneville, Ark.