A course of construction insurance policy will cover a contractor
while a house is under construction. It is important for contractors to
have this coverage for any project that is being undertaken. Contractors
should be aware that this coverage is different from a course of
renovation policy. Getting the insurance can be costly, but it is a
necessary evil.
Construction Insurance Versus Renovation Insurance
It
is important that a person can distinguish between a construction job
as opposed to a renovation job. Construction is considered anything that
begins with the frame of a house. Renovation is considered anything
that is more than 10 percent of the value of the existing home.
Contractors should get in touch with their insurance provider to
determine what kind of work is being done. It can be the difference
between getting coverage and going into a project without a safety net.
What Will My Policy Cover
Your
policy will cover just about any type of loss that you can think of.
The losses are generally divided into two categories. The first are
referred to as hard losses while all other losses are referred to as
soft losses.
A hard loss is something such as a building burning
down. Fires can occur rather easily when there are many people working
in and around a property. An oily rag can set off a fire as well as a
lightning strike from a passing storm.
Vandalism and other forms
of theft are also covered. If you leave the house unoccupied for a long
period of time, you may find that criminals will strip the home of
copper or other raw materials.
Soft losses are the expenses that
you incur because your project has been delayed. Interest that accrues
on your construction loan, added attorney fees and extra insurance
premiums will generally be covered by your policy.
Some policies
will include coverage for certain losses that other policies will not.
Make sure to read your policy carefully to see if anything has been
specifically excluded from your policy.
How Much Damage Will My Policy Cover
A
construction insurance policy can come in handy if anything should
happen. This is because you can get coverage for up to $5 million.
However, this makes insurance rather pricey. It isn’t uncommon to see
insurance premiums cost hundreds or thousands of dollars a month. This
is something that a contractor needs to factor in when trying to
determine the profit margin for building a new home.
What Will My Policy Not Cover
It
cannot be stressed enough that you need to read your insurance policy
to determine what is not covered in your own unique situation. However,
there are a few common items that are not covered by this type of
policy.
Poor construction quality is not covered under this type
of policy. For example, if your building collapses because you used
substandard materials, you will be responsible for the loss. Insect
damage is another item that is generally not covered.
Ground
shifting under the construction site may also cause you to be
responsible for your losses. Therefore, it is important to build with
quality products in a place where nature cannot get to it.
Getting
course of construction insurance can provide a contractor with some
financial relief should anything go wrong. The contractor will not be on
the hook if a fire, flood or some other natural disaster happens to
take out the home. This is a good thing because an accident can happen
at any time. As long as the work being done is of high quality, the
contractor should not have to worry about losing his money.