In construction, mistakes happen. Sometimes they’re baby hiccups like failing to tape door hinges before painting, sometimes they’re big ol’ blunders like building a million-dollar vacation home on the wrong lot, and sometimes they’re full-blown disasters like the Millennium Tower in San Fran that has sunk 16 inches and tilted 2 inches over the last decade.
Embarrassing, right? Sure, biggies like the last are rare, but contractors mess up all the time. But don’t freak out, there’s a way to ease your concerns and curb countless entries in your “feelings” journal.
Two words: “builders” and “risk.” Put them together, add “insurance,” and you’ve got yourself a stew of protection. But before we dive into the heavenly coverage of builder’s risk insurance, let’s explore the common construction screw-ups these high-stakes Lego builders are prone to make.
During construction, plans change. A room looks too small or strangely shaped, and blueprints are altered. If the updates are not communicated, the repercussions could be hideous.
If every order contract isn’t carefully inspected, a person could sign off on the wrong thing, like when a builder (who wishes to remain nameless) accidentally bought $40,000 of the wrong cabinets and had to redesign the kitchen around the mistake.
Excavation machines can cut corners (literally) and take off part of your new siding. Painters drop paint cans that dent your beautiful new floor. These butterfingers can cost your project time and money.
Water has a mind of its own and will flow into your project whenever a contractor makes a mistake, like the careless and nameless plumber who failed to double-check the roughed-in caps and flooded the second floor of a 10,000 sq. ft. luxury home.
Signing a construction contact without a firm completion date is asking for trouble. Before you know it, your 6-month renovation stretches into a year.
Since there are coverage gaps in all of the policies held by the different parties involved, like a contractor’s general liability policy, added protection will be needed to seal up peace of mind. That way, if your project gets mauled by the bad-luck bear, your insurer will be there to help you pick up the pieces.
To give you a little taste of disaster, here are some catastrophe stats compiled by the Insurance Information Institute to scare you straight. These are insured losses due to:
And what Mother Nature doesn’t screw up, man can and does. Vandalism, especially thieves looking for copper in pipes and wire, can be a big problem for builders. The National Insurance Crime Bureau recently reported 27,450 copper thefts from 2014 to 2016.
Okay, let’s back it up, builders’ risk insurance, a.k.a., course of construction insurance, is a type of coverage that protects against mistakes and mishaps that damage a building, construction equipment and materials waiting to be installed or delivered.
Typically, a policy will last three, six or twelve months, and can usually be extended at least once if the building is not completed. Coverage can continue for up to 90 days after completion or until the building or structure is occupied.
Like most things, you get what you pay for when buying builders’ risk insurance, which usually costs from 1% to 4% of the construction budget. The more comprehensive the coverage, the more you’ll pay. You can buy a special form “all-risk” policy, which basically covers all losses EXCEPT those specifically excluded or limited.
The majority of claims covered under builders’ risk policies come from burst water pipes (that’s a biggie), fire and vandalism. Most builder’s risk insurance policies don’t cover acts of God like floods or earthquakes. If you live in places prone to those catastrophes, it’s wise to purchase supplemental flood or earthquake insurance.
Also, builders’ risk insurance doesn’t include coverage for losses due to faulty workmanship or design, because those kinds of errors won’t typically reveal themselves until after coverage has ended.
A whole hearty spoonful of common construction mistakes served with a half-full glass of hope. We realize it was a fairly sweet-and-sour experience, but if digested properly, this info should help you make smart choices. And always remember, measure twice, cut once, look both ways, double-check, triple-check and make sure your shoe laces are tied.
Good luck and be safe!