A Complete Checklist for Evaluating Builders Risk Insurance Policies

When undertaking a construction project, securing a Builders Risk Insurance policy is critical for protecting your investment from unforeseen events. However, navigating through the myriad of policy options can be daunting. To ensure you choose the right coverage for your project, here’s a comprehensive checklist to guide you through the evaluation process.

1. Coverage Scope

  • [ ] Property Coverage: Ensure the policy covers not just the structure, but also materials on-site, in transit, and possibly stored off-site.
  • [ ] Soft Costs: Check if soft costs (non-labor costs such as architectural, legal fees, and interest payments) are covered in case of delays.
  • [ ] Testing Coverage: Some projects require testing of installed equipment. Verify if this is covered.

2. Policy Limits and Deductibles

  • [ ] Adequate Limits: Confirm that the policy limits reflect the total completed value of the project, including all materials and labor.
  • [ ] Deductibles: Understand the out-of-pocket expenses you will incur before insurance kicks in.

3. Exclusions and Restrictions

  • [ ] Common Exclusions: Familiarize yourself with common exclusions like earthquakes and floods. If your project is in a prone area, consider additional coverage.
  • [ ] Material Exclusions: Some policies exclude certain materials or construction methods. Ensure your project materials and methods are covered.

4. Duration and Extensions

  • [ ] Project Duration: Verify that the policy covers the entire duration of the project. Check if there are any restrictions on delays.
  • [ ] Extension Options: Look into the possibility of extending coverage if the project exceeds its expected completion date.

5. Claims Process

  • [ ] Claims Reporting: Understand the process for reporting and filing a claim. Know the deadlines and necessary documentation.
  • [ ] Settlement Process: Learn how the insurer calculates payouts and if they use replacement cost or actual cash value.

6. Additional Coverage Options

  • [ ] Business Interruption: For projects involving renovations or expansions of existing businesses, this coverage can compensate for lost income.
  • [ ] Ordinance or Law Coverage: If rebuilding requires updated compliance with newer building codes, this coverage can be invaluable.

7. Cost

  • [ ] Premiums: Compare premiums from different insurers for the same level of coverage.
  • [ ] Payment Options: Some insurers may offer flexible payment options. Check what’s available.

8. Insurer’s Reputation and Financial Stability

  • [ ] Ratings and Reviews: Research the insurer’s ratings through agencies like A.M. Best or Standard & Poor’s.
  • [ ] Claim Settlement History: Look into the insurer’s history of claim settlements to gauge their reliability and efficiency.

By diligently going through this checklist, you can ensure that your Builders Risk Insurance policy adequately protects your construction project. Remember, the goal is to find a policy that offers comprehensive coverage tailored to the specific needs and risks of your project while also providing peace of mind throughout the construction process.