Any time you take on a new building or renovation project in Arizona, you take on some risk. What if your construction project is derailed by severe weather or a disastrous accident? Will it be covered? It will if it is protected by a suitable builders risk insurance policy.
Before you start your construction project, be sure to consult a local independent insurance agent. These agents can help you find a suitable builders risk insurance policy at a competitive price. Find an insurance agent near you to learn more.
What Is Builders Risk Insurance?
Sometimes referred to as “course of construction insurance,” builders risk insurance is a specialized type of property insurance that is meant to cover building materials, construction equipment, and structures that are currently under construction or renovation.
Builders risk policies are temporary. Coverage typically begins once all work contracts have been signed and the project begins and ends as soon as the project is completed.
What Does Builders Risk Insurance Cover in Arizona?
Arizona builders risk insurance is designed to cover building materials, construction equipment, and structural property against many of the hazards you are likely to face while completing construction or renovation projects in Arizona.
It can also cover a variety of additional losses that may arise if the project experiences problems or takes longer than expected. These are known as “soft costs.”
Bear in mind that different insurance companies may offer differing ranges of coverage. While one insurance company’s builders risk policy may include coverage for subcontractors' tools and equipment, another’s may not.
That is why when comparing policies, you need to look at more than just the price. A local independent insurance agent can help you review the policies that are available to you and can help you determine which offers the best value for the coverage your project needs.
What Construction Hazards Are Covered by Arizona Builders Risk Insurance?
The hazards that your builders risk insurance policy will cover against can vary according to the type of policy you purchase. If you have opted to buy a less expensive named-peril builders risk insurance policy, you will only be covered against the risks you specified when you bought the policy.
Most builders instead purchase what is known as “all risks coverage.” When you have builders all risk insurance, you can expect to be covered against all potential hazards except those that are specifically excluded by the policy, like floods and earthquakes.
All-risk builders risk insurance policies cover against:
- Fires, including accidental fires, wildfires, and arson (unless the fire was purposely started by you or one of the employees on the job).
- Severe weather events, including electrical storms, windstorms, monsoons, tornadoes, and hail.
- Property crimes, including theft and vandalism.
Talk to a local independent agent for more information about the hazards that your builders risk insurance policy can cover against.
Is Construction Property Covered by Arizona Builders Risk Insurance?
Builders risk insurance is designed to cover against loss or damage to property including:
- Building materials and supplies
- Tools and machinery
- Construction equipment
- The building under construction or renovation
When appropriate, you can extend this coverage by purchasing special endorsements for certain items such as:
- Temporary structures at the job site
- Important paper such as construction forms, plans, and blueprints
- Property kept in temporary storage facilities
- Debris clean-up and disposal
An independent agent can help you go over the coverage needs of your construction project to ensure that you have all the extensions necessary to be fully covered by your builders risk insurance policy.
What Are Soft Costs Covered by Arizona Builders Risk Insurance?
Soft costs are extra expenses or financial losses that are incurred due to unexpected problems that result in a delay in the project completion date, such as might happen if the project must be temporarily put on hold due to a dangerous heat wave.
In order to be covered against these additional costs, your builders risk policy must include soft cost coverage, which is an additional endorsement. Some examples of soft costs that your policy may cover include:
- Loss of sales or rental income
- Real estate taxes
- Premiums for insurance renewals
- Legal fees, architectural fees, and accounting fees
- Additional marketing expenses
- Additional interest on loans
An independent insurance agent can explain more about what adding soft cost coverage can do for you, and can provide you with an estimate of how much it will cost to add this endorsement to your builders risk insurance policy.
What Is Not Covered by Builders Risk Insurance in Arizona?
There are a few risks that are not covered by builders risk insurance. To be covered against these hazards, you will need to purchase supplemental coverage, if available. Specifically, builders risk insurance does not cover:
- Poor design or workmanship: If a project fails because it was poorly designed, built, or planned, or if the materials used in the construction were substandard and faulty, your policy cannot cover the resultant losses. You may be able to get some coverage by ensuring that your project planners are covered by professional liability insurance.
- Mechanical malfunctions: While your builders risk insurance can cover your machinery and equipment if it is damaged by a covered event, it will not cover equipment malfunctions and breakdowns. To be covered against this risk, you will need to carry contractors equipment insurance.
- Floods: Although flooding and water damage caused by a leaky pipe or a damaged roof may be covered by your policy, overflow events caused by storms and monsoons are not. If your project is at risk for flood damage, talk to an independent agent for information about purchasing flood insurance. These policies take 30 days to go into effect, so some preplanning is necessary.
- Employee theft: Your builders risk insurance policy will cover against theft and vandalism only if it is done by a third party. It will not cover against crimes committed by one of your employees or subcontractors. Running background checks on potential employees before hiring them can help to protect your business interests.
- Your construction vehicles: Any vehicles owned and operated by your construction firm, contractors, or subcontractors will need to be covered by a commercial vehicle insurance policy that meet’s Arizona’s minimum coverage requirements.
- Acts of war or terror: While the risk of this being a problem in Arizona is low, it is important to be aware that if your building project is damaged due to war or an act of terror, your insurance provider may not cover your losses.
Local independent insurance agents can go over your builders risk insurance policy limitations and can help you purchase any necessary supplemental policies, if available.
Are Construction Workers Responsible for Purchasing Builders Risk Insurance in Arizona?
Builders risk insurance policies are typically the responsibility of either the general contractor or the owner/developer on the project. Anyone who has a financial interest in the project should be named in the policy.
Policies should be built to include and cover:
- The property owner
- The general contractor
- Any subcontractors hired for the job
If you are a homeowner who is taking on a large renovation project, be aware that your homeowners insurance is not likely to provide coverage if something goes wrong during the renovation.
Fortunately, by having homeowners builders risk insurance, or being named on a policy purchased by a general contractor, you will have the coverage you need.
How Much Does Builders Insurance Cost in Arizona?
Builders risk insurance policy costs can vary from one project to the next. Rates are calculated according to several factors such as:
- The size of the project and its associated construction costs
- The coverage options and endorsements included in your policy
- The time of year that the project will take place
- The amount of your deductible
In general, you can estimate your builders risk insurance costs to be about 1% to 4% of your total construction costs. Of course, the only way to get an accurate price is by requesting customized quotes. A local independent insurance agent can help you compare costs from a few competing providers.
How to Find the Best Builders Risk Insurance in Arizona
Local independent insurance agents can answer your insurance-related questions and help you find suitable coverage for your construction or renovation project. These agents are free to work with a variety of insurance providers, so they can save you time and money by shopping around to find you the best and most affordable policies.
There are more than 400 independent agents in Arizona. Set up an obligation-free consultation with an insurance agent near you to get more information and to start comparing customized builders risk insurance quotes.
TrustedChoice.com Article | Reviewed by Jeffrey Green
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