Builders Risk Insurance
The purpose of Builder’s Risk Insurance is to protect property during the course of a construction project. It includes coverage for theft, vandalism, accidental losses, and damage, or destruction of property for which you have an insurable interest. This article will focus on the theft coverage provided in the event of a claim.
Because construction sites are temporary in nature, it is difficult to properly secure materials making them especially prone to theft. While you can take measures to avoid theft at your construction site, there is no fool proof plan to eliminate this risk. A builder’s risk insurance policy is an option that will cover your loss of property in the event that you are a victim of theft.
Builder’s Risk Insurance Claim Example
A commonly targeted material used in many construction projects is copper, due to its high recycling value. According to the United States Department of Energy, copper wire theft costs the public an estimated $1 billion per year and construction sites are a prime target. If copper is stored on a construction site for a project covered by a Builder’s Risk Insurance Policy, it is typically covered for theft.
In a real life scenario, a builder’s risk insurance policy had been purchased for a construction project for an addition to an existing medical treatment facility. While the electrical subcontractor was in the process of roughing in the mechanical and electrical installation, a theft of a large amount of copper wire and pipe occurred. This was despite the fact that the project site was fenced in and the front gate locked after work hours. Not only did the thieves take the copper wire that was being stored on the construction site, they also removed copper that had already been installed.
The owner filed a claim on their builders risk insurance policy. The policy covers loss or damage that is the result of theft to the following types of property:
- Machinery and fixtures
- Building service equipment
- Building materials and supplies of the insured to be used in construction
The third type of covered property applies in this situation - the copper wire and pipe was intended to become a permanent part of the property. It is also important to note that their materials, although not inside the premises, were within 100 feet, a requirement in the owner’s builders risk insurance policy in order for the property to be covered.
Because of the owner’s builders risk insurance policy they were able to recover from the insurance carrier the cost to replace the property with materials of like kind and quality. The claim was settled for $40,000 with the insured paying a $5,000 deductible.
Builders risk insurance policies can vary from insurance carrier to insurance carrier and may have more or less of the requirements and conditions included in the example above. For instance, some builder’s risk plans require a night watchman to be onsite during non-work hours. If that were the case in this situation, the owner above would not have been covered. Another possible twist to this situation is if the theft of the materials had occurred at other stages in the construction project. It is important to be sure your builders risk insurance policy covers your property during transportation, storage, and installation. Although there are many more ways that a policy can differ from one insurance carrier to the next, the last I will note is the option for business interruption coverage. which would respond if the theft temporarily shuts down your operation. As you can see, it is important to analyze your specific needs in detail to ensure properly customized builders risk coverage.
Theft is just one example of the many coverages afforded by a builder’s risk insurance policy.
Contact RJ Ahmann: Builder's risk insurance provides valuable protection. To create a builder’s risk insurance policy that will be effective and affordable, you need a company that customizes your policy for you. Visit us at Small Business Insurance Liability to consult with an insurance professional who will construct a builder’s risk insurance policy that will work for you.