do you need builder's risk insurance for renovations

Do You Need Builder’s Risk Insurance for Renovations?

If you currently have the opportunity to renovate your house, it may make a lot of sense right now. Better yet, renovations get you and your family out of an unsafe building.

To renovate your home successfully, you need the right type of builder’s risk insurance for renovations to protect you. Otherwise, you open yourself to all manner of liabilities.

To find out the appropriate coverage for renovations, first make sure you have general commercial insurance for the original building. Next, get an insurance review by a professional to ensure you have the right amount of coverage. In many cases, you’ll only need additional coverage for added work.

So, do you need builder’s risk insurance for renovations? Keep reading to take a closer look at the type of insurance needed and to learn what does insurance cover for home renovations. 

What Is Builder’s Risk Insurance? 

Builder’s risk insurance is property insurance designed for structures being built or renovated.

This construction insurance guards the property owner or contractor against financial loss. These losses may be due to damage or accidents along with the project’s construction. 

Do You Need Builder’s Risk Insurance for Renovations? 

If you’re trying to figure out if your build or renovation needs builder’s risk insurance, review the homeowner’s policy.

There is often a clause omitting coverages for major renovations, structural work or vacancies related to renovations. Builder’s risk insurance protects you from potential losses and ensures that your home is protected. We offer coverage for major renovations, and if applicable, vacancy during the project.

Who Needs Builder’s Risk Insurance? 

Anyone with financial stakes in a renovation or build should consider getting builder’s risk insurance. This includes property owners, engineers involved with the project, and contractors. Builder’s risk insurance is the best insurance for renovations. 

You don’t need to worry about double-dipping, as all parties can be involved in a single policy called wrap up liability. This generally covers all construction related parties in a construction project.

The general contractor typically purchases the builder’s risk coverage. They serve as the primary insured when several parties work together on a construction project. Subcontractors and the building owner will be included as extra insureds. 

What Builder’s Risk Insurance Covers

Builder’s risk policies offer broader coverage of your property. This insurance can cover theft of building materials, storage, and more. It also extends to unintended damage done to the lawn or roads.

Some builder’s risk policies even cover damage done by natural disasters. Most insurance companies require a separate policy for unexpected events. Thankfully, builder’s risk insurance can help you salvage your property and rebuild. 

Different Policies Available

Builder’s risk insurance policies are available for property owners and for construction teams. These policies can cover both residential and commercial properties. There are two primary categories of builder’s risk insurance policies. 

Location Specific

If you need insurance for renovations, look into a location-specific policy. Location-specific policies are typically bought by property owners. These people are interested in covering a single construction site.

This straightforward policy covers damages incurred at a single residential or commercial property. 

Blanket Policy

Blanket policies are taken out by construction teams or commercial entities. These parties are juggling multiple construction projects simultaneously.

These policies are of higher value. Rates are set by the insurance policy depending on the scope of the projects. They also factor in the number of sites included in the policy, and they should also include wrap up liability to cover all parties.

Minimized Claims and Attractive Policies Offered

When you are financing a remodel or renovation, your home will be an active worksite. This often increases the risk of minor damages.

That is why builder’s risk insurance allows you to protect yourself while parts of your home are exposed to a working crew. You need good insurance to cover renovations. 

Builder’s risk insurance policies typically cover a 12-month period for a single structure contract. They can easily be extended through underwriting if your project is taking longer than expected. 

Builder’s risk insurance is attractive to homeowners because claims don’t impact future coverage. Typically insurance adversely affects your pre-existing homeowner’s policy.

Many people shy away from utilizing their insurance out of fear. Policyholders worry that premiums will skyrocket after a repair. Builder’s risk insurance exists so you can protect your home and finance repairs. 

How to File a Claim

Builder’s risk insurance covers losses or damages up to the policy maximum. After a loss or accident occurs on-site, you will document the cost of the loss in a proper report and submit a finalized claim. The insurance company will then review your claim and finance repairs or new equipment, as long as it does not exceed your coverage limit. 

The coverage limit is decided when you acquire the policy. This value usually corresponds to the project’s projected completed value. This would include the cost of construction, labour, existing structure and materials.  

What Is Excluded from Builder’s Risk Insurance? 

There are some limitations to what home renovation insurance will cover. Ordinary wear and tear, mechanical failure, or employee theft are not covered. These restrictions keep construction teams from abusing the insurance system to upgrade equipment. 

Standardized builder’s risk insurance claims also may not cover some natural disasters. If you live in an area where earthquakes or hurricanes are common, inquire about this before finalizing your policy. 

Invest in Builder’s Risk Insurance 

Now you know the answer to the question, “do you need builder’s risk insurance for renovations?” Financing a renovation can be costly. That is why you should take the necessary precautions to protect your investment in case the project goes awry. 

Interested in protecting your assets and ensuring that your ideal renovation is completed with expert care? Invest in builder’s risk insurance. Contact James Inwood for your insurance needs. 

James Inwood is a member of Canadian Insurance Brokers Inc. CIBI operates across Canada with more than 40 licensed brokers and is completely independent so our advice is always objective. Representing 14 insurance carriers on the personal side and over 20 insurance providers on the commercial side helps give my clients clear choice and competitive pricing.

James Inwood, Insurance Broker
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