If you are in the construction business, there are some insurance policies you must carry to protect yourself. Workers’ Compensation Insurance and Commercial Auto and Truck Insurance are two examples. But there’s another lesser-known type of coverage that can be a lifesaver if a building you’re working on and/or your construction materials are damaged during construction: Builders Risk Insurance. You can purchase these policies for varying time frames, and coverage ends when the project is complete.
What Does Builders Risk Insurance Cover and Exclude?
When you have a Builders Risk Insurance and there is damage to the job site the policy was written for, it typically will cover damages resulting from the following events:
- Damage from fire or explosion
- Damage from lightning strikes
- Hail damage
- External theft
- Damage caused by vehicles or aircraft crashing into the structure
In some areas, a Builders Risk Policy will cover wind-related damages. But in areas prone to wind events (such as coastal areas prone to tropical storms and hurricanes) coverage for wind-related damage may be excluded.
Most builders risk policies will not cover damage from:
- Collapses (limitations usually apply)
- Water damage including flooding (FEMA runs a National Flood Insurance Program to help mitigate flood risks)
- Weather-related damage to property left unprotected in the open
- Government activities
- Mechanical breakdowns
- Faulty design, planning, materials, or workmanship
- Contractual penalties or voluntary partings
Additionally, most Builders Risk Insurance Policies will not cover tools or equipment, liability, workplace accidents or property belonging to anyone besides the insured (including subcontractors).
What Is General Liability Insurance?
General Liability Insurance is an absolute necessity in the construction industry, but it will not provide coverage in certain cases. It will protect you if you are accused of causing injury or property damage, as well as negligence. Defending yourself against lawsuits is expensive, and a General Liability Policy can help you with legal fees and will keep your business in operation. In other words, it protects you against potentially devastating professional risk.
What Does General Liability Insurance Cover and Exclude?
A General Liability Insurance Policy issued by a reputable provider typically will cover you if any of the following occur:
- Someone is injured on your property
- You are renting commercial space that becomes damaged
- You or your employees cause injury or property damage
- You are sued for false advertising, libel, slander or copyright infringement
General liability insurance typically does not cover:
- Errors and omissions
- Lawsuits that involve something other than bodily injury, property damage, personal injury and false advertising
Which of these policies should you choose? Both.