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Homeowners insurance is typically for completed homes, and builder’s risk coverage is for the construction and renovation processes. Therefore, some losses may occur if you experience issues during the building stage, whether due to theft, fire, or other types of damage. Continue reading to explore the available options and determine how they can best suit your construction project.
Potential Risks
If you don’t have protection during the building phase of your project, it could leave a significant gap that causes major financial loss. One of the most costly risks is damage done to the unfinished structure. Homeowners insurance doesn’t typically offer coverage in this case because the area is vacant and isn’t considered habitable before completion.
Builder’s risk insurance is specifically designed to protect unfinished structures. Don’t assume this is included in your home insurance coverage, as the limited scope could not only cause financial setbacks but also halt the construction process altogether. Your provider may offer additional coverage as a rider or endorsement to handle construction challenges.
Differences
Both standard coverage and builder’s risk options are beneficial for homeowners. However, a builder’s policy is temporary, while the homeowners insurance San Diego residents purchase is permanent. The completed value of the project determines builder’s risk coverage limits, and it may be higher because it’s based on an assumed value, assuming the lot is either vacant at the time coverage is purchased or a structure is partially built.
The scope is broader for builder’s risk insurance because it specializes in things standard coverage won’t include. Homeowners insurance protects the property owner from personal liability. In contrast, builder’s risk may also apply premises liability to the owners of the home but with limitations, such as in situations where only visitors are injured, not workers. While there are many differences, both policies typically avoid coverage for the contractors and design teams.
Standalone Builder’s Risk Coverage
This coverage is essential because it addresses your project’s specific needs. If there’s an expense you can bypass, you can tailor your policy, saving you money and time.
While storm damage and the damage, theft, and vandalism of building materials are often covered in a standalone builder’s risk policy, other issues like earthquake and flood damage are not. In such instances, you may need to purchase endorsements tailored to your location and project type.
Consult with Builders
Contractors also need to obtain coverage. Verify their policy ahead of time, and ensure they have certificates for various sides of the project, such as workers’ compensation and general liability.
Don’t assume every factor is covered under a builder’s risk policy. Instead, consider purchasing umbrella insurance to get additional liability coverage. Working with an insurance provider will enable you to identify the most suitable options for your construction project. Doing so can also help you learn more about exclusions and how they apply to damage to property under construction or about vacancy clauses.
If you own a home or are considering buying one, take the time to understand exactly what your homeowners insurance policy does—and doesn’t—cover. It could save you a lot of time and heartache. The professionals at Altra Insurance Services will be happy to help you examine your current policy and determine if you have the coverage you need. We can also help you with renters insurance, commercial insurance, and motorcycle and auto insurance San Diego residents can rely on. Call one of our friendly agents today.