The Contractor’s Risk Insurance Guide: What You Need to Know

Contractor's (Builder's) risk insurance is crucial to managing risk in construction projects. It protects buildings/structures/projects under construction, erection, renovation, or repair, covering damages that may occur before project completion. This guide provides an overview of key considerations, ensuring that builders and property owners are well-informed about this essential insurance type.

1. Understanding Builder’s Risk Insurance

Contractor’s risk insurance, also known as course of construction insurance, covers property while it is under construction or renovation. It typically protects against damages caused by fire, vandalism, theft, and weather-related damage. Understanding the basics helps ensure you select the right coverage for your project.

2. Importance of Builder’s Risk Insurance

Contractor’s risk insurance is vital for protecting investments during construction. Without it, businesses could face substantial financial losses from damages or delays. This insurance helps cover repair or replacement costs, minimising financial setbacks and ensuring the project's completion.

3. Coverage Inclusions

Contractor’s risk insurance generally covers:

• Property Damage: Protection against physical damage to the structure.
• Materials and Supplies: Coverage for materials and supplies on-site.
• Equipment: Protection for construction equipment and tools.
• Weather Events: Coverage for damage from specific weather conditions.

4. Exclusions to Watch Out For

Contractor’s risk insurance policies may exclude certain risks:

• Wear and Tear: Regular maintenance issues are usually excluded.
• Faulty Workmanship: Issues resulting from poor construction practices are generally not covered.
• Plant, Machinery & Work tools: not covered unless specifically added or a stand-alone cover is taken.

5. Duration of Coverage

Coverage typically begins when construction starts and ends when the project is complete. Ensure that your policy covers the entire duration of the project, including any potential delays or extensions. Discuss timelines with your insurer to avoid gaps in coverage.

6. Required Documentation

To secure builder’s risk insurance, you'll need:

• Project Details: Information about the construction project, including the scope, location, and estimated completion date.
• Contractor Information: Details about the contractors and subcontractors involved.
• Construction Plans: Blueprints and specifications for the project.

7. Cost Considerations

The cost of contractor’s risk insurance varies based on:

• Project Size and Scope: Larger projects or those with complex risks may have higher premiums.
• Location: Areas prone to specific risks, such as natural disasters, can affect costs.
• Coverage Limits: Higher coverage limits increase premiums.
• Project duration

8. Selecting the Right Coverage

When choosing a contractor’s risk policy, consider the following:

• Coverage Limits: Ensure limits are adequate for your project's total value.
• Deductibles: Assess deductible amounts and their impact on your premiums.
• Additional Coverage: Explore optional coverages for specific risks relevant to your project.

9. Working with an Insurance Broker

An experienced insurance broker can:

• Assess Your Needs: Help determine the appropriate coverage for your project.
• Compare Policies: Provide access to various insurers and policies.
• Negotiate Terms: Assist in negotiating terms and premiums to suit your budget.

10. Reviewing and Updating Your Policy

Regularly review and update your policy to reflect the following:

• Project Changes: Adjust coverage if there are significant changes to the project scope or value.
• Completion Status: Update your insurer when the project nears completion or if the timeline changes.
• Cover Period: Extend insurance coverage if the project is not completed on specified time schedules

Conclusion

Contractor’s risk insurance is an essential safeguard for any construction project. By understanding its coverage, exclusions, and cost considerations, you can protect your project against potential risks. For tailored advice and to secure the right contractor’s risk insurance for your project, contact Afric Cover Insurance Brokers. Our experts are here to help you navigate the complexities of construction insurance and provide the protection you need.

Disclaimer: This guide is for informational purposes only and does not constitute financial advice. For personalised guidance, please consult with an insurance broker or expert.