Property insurance is a type of coverage commonly seen in the construction world that provides protection for structures while they’re being built. This type of coverage is also often referred to as builders’ risk insurance, as it protects builders from the financial setbacks that come along with any on-site accidents. Builders’ risk insurance is essential for keeping a project running smoothly without large financial setbacks.
In this blog, we’ll be talking about different protections that exist in the construction industry and what kinds of situations they cover, with a special focus on the ever-important property, or builders’ risk, insurance.
Want to learn more about necessary construction insurance procedures or the different levels of certificate of insurance services that our team of experts has to offer? Explore our blog or reach out to talk to us today.
What Are the 2 Types of Property Insurance?
Property insurance is a crucial safeguard for protecting buildings and their owners from financial losses due to damages or unforeseen events. When selecting a property insurance policy, it’s essential to understand the types of coverage available and how they align with your budget and needs. The two primary forms of property insurance—All-Risk Insurance and Named-Peril Insurance—each offer different levels of protection, catering to various circumstances.
All-Risk Insurance
All-Risk Insurance, also known as “open-perils” or “comprehensive” insurance, provides extensive coverage that protects against a wide range of potential risks or perils, except for those explicitly excluded in the policy. This type of insurance is ideal for property owners who seek the highest level of protection for their assets, ensuring coverage for almost all conceivable scenarios. Common exclusions might include natural disasters like earthquakes and floods, wear and tear, or intentional damage. Policyholders may need to purchase additional riders or separate policies to cover these excluded risks. All-Risk Insurance is generally more expensive than Named-Peril Insurance, but it offers peace of mind by covering unexpected incidents that might otherwise lead to significant financial loss.
Named-Peril Insurance
Named-Peril Insurance, on the other hand, offers coverage specifically for risks that are explicitly listed in the policy. This type of insurance is often more affordable than All-Risk Insurance, as it provides limited protection tailored to the most common and likely perils. Typically, these include fire, theft, vandalism, and sometimes certain types of weather-related damage, such as hail or windstorms. Property owners who choose Named-Peril Insurance must be diligent in understanding what is covered and what is not, as any damage caused by a peril not listed in the policy will not be covered. This option may be suitable for those with a lower risk profile or those looking to reduce insurance costs while still maintaining essential protection.
What Are the Three Types of Insurance That Are Most Relevant to Construction Projects?
There are three types of insurance that are especially common in construction projects: property insurance (also known as builders’ risk insurance), professional liability insurance (also known as errors and omissions insurance), and general liability certificate of insurance.
Builders Risk Insurance
This kind of coverage provides protection for buildings and structures while they are under construction (being built or renovated). This can also include losses like materials, equipment, and fixtures on a construction site. It acts as a safeguard against various perils that could occur and the large financial disruptions they would bring.
General Liability Insurance
This policy covers incidents of bodily injury, property damage, and personal injury claims that stem from a construction project. General liability is crucial for contractors and construction companies to hold in order to reduce the potential of costly litigation.
Professional Liability Insurance
This insurance protects against claims of negligence in the professional services areas of construction, such as by architects, engineers, design-build contractors, or other project consultants. Find out about subcontractor insurance requirements.
What Is Builders Risk Insurance Also Known As?
Builders’ risk insurance is one type of construction insurance. This type of coverage protects structures as they’re being built, renovated, or otherwise constructed. This coverage is crucial for covering losses for very common risks like fire, theft, weather-related damage, and more throughout the construction process.
What Is Insurance in Construction Management?
Insurance is vital to any and every construction project. While coverage won’t reduce the likelihood of risks themselves, it will provide guaranteed financial protection in the unfortunate case that they do occur. Key types of insurance in construction management will largely be the “big three” that we’ve covered above, such as:
- Builders risk insurance
- General liability insurance
- Professional liability insurance
Some other commonly seen policies within the construction industry include:
- Workers’ compensation insurance (required in most jurisdictions; provides benefits to employees who suffer work-related injuries)
- Contractor’s Pollution Liability Insurance (covers claims of work-related pollution incidents)
- Subcontractor default insurance (so you’re protected from some of the financial losses when a subcontractor quits on you)
- Commercial auto insurance (if automobiles are used in the construction work to transport people or materials, they should also be covered!)
Insurance policies like these ultimately help building teams manage risks, protect against liabilities, and ensure that projects can be completed on time without major disruptions.
Navigating the world of insurance can be complex, but proper insurance coverage is crucial for protecting the interests of everyone involved with a project.
Make Sure Your Property and Vendors are Always Insured with Our COI Management Services
Looking to improve your construction management efforts? You’re not alone. Many construction companies are tired of suffering the consequences of costly claims due to a lack of information and proper protection.
Certificate of Insurance ServicesAt myCOI, we can help your team understand the ‘why’ behind your risk exposure so you can learn how to reduce it. Lay your worries to rest and learn how to protect yourself, your property, and your third-party partners on all projects moving forward. Reach out to us today.