As the construction industry grows and develops, so does the risk associated with construction projects. Fortunately there are business insurance options to provide coverage. If you are a construction professional, it’s important to understand how a builder’s risk insurance policy can help protect your New Jersey project.
Usually construction contracts require a building owner or contractor to purchase and maintain a builder’s risk insurance policy. This insurance policy is designed to provide coverage for loss or damage to the unfinished building’s construction materials on the work site during the course of construction. The policy can also be extended to cover existing structures if the project is a renovation. Exposures are broken down into three general parts: hard costs, soft costs and business income or loss of rents.
Hard costs are the tangible assets that make-up the construction project, basically the costs of material and labor.
Soft costs, also known as Delay in Opening Expenses, are usually covered and limited by special endorsements to builder’s risk property policy. Coverage is provided for additional construction loan interest, real estate taxes, marketing and re-leasing expenses, administrative expenses, and architectural/engineering fees which are incurred as a result of a covered loss – one that causes delay in completion of a project.
Business Interruption (BI) or Loss of Rent provides coverage due to a delay in start-up. Much like a Business Interruption standard property policy, the extension typically covers operating profit, fixed costs, expenses that continue post-loss, and expenses incurred to reduce or avoid a delay in opening.
The important point here is that there are a lot of factors to consider when selection a Builders Risk Insurance Policy. The problem is that many owners and contractors do not believe they are going to have a loss in the first place and often forgo additional coverage.
As a contractor, it is good to sit down with an experienced agent who specializes in builder’s risk policies. The business insurance experts at LG Insurance Agency can work with you to select Builder Risk Insurance coverage that fits your needs. Contact us today for a free quote and consultation.
