Builder's risk insurance is a specialized type of property insurance that helps protect buildings under construction. It is essential in helping protect construction projects but can be complex and often misunderstood. However, having a properly structured builder's risk policy can be crucial. In fact, it will serve as the backbone of a successful risk management program.
Builder's risk insurance helps protect construction projects from property damage due to:
Any person or company with a financial interest in the construction project needs a builder's risk insurance policy. Some common people you may want to include on your policy as insureds or additional insureds include:
When building a structure from the ground up, remodeling an existing building, or simply increasing the square footage of your existing hospital, builder's risk is a critical component of protection for your project. To simplify the process many contractors will offer to provide builder's risk for you and include the cost of insurance in the cost of construction. This should be avoided for a variety of reasons:
Change orders
Virtually every construction project experiences change orders during construction. Often those changes increase the cost which requires alterations to your builder's risk limit of coverage. However, contractors are notorious for not making those changes to builders' risk policies after construction commences. So for example, if you are building your new hospital and borrow additional money to complete alterations, not originally contemplated, what happens if the structure burns to the ground before construction is complete and the limit of insurance is too low? Always retain the power to make changes to the builder's risk policy through an agent that represents you, not the contractor.
Profit Center
Contractors that provide builders risk insurance often charge more money to their customers than the policy actually costs. As a result, the contractor is even less likely to make changes to the policy limit for change orders because it can erode their profit unless they charge more money to you for those policy alterations.
Existing structure uninsured
If you are purchasing an existing structure to do a major remodel, never allow your contractor to provide builders risk. Because they have no insurable interest or ownership in the existing building, they will not include coverage on a builders risk policy for the existing structure. So for example, if you buy an existing building and your contractor provides builders risk and the building is destroyed by a fire, who is responsible for compensating you for the loss to the original structure? Always get builder's risk insurance for yourself and do not trust a contractor to protect your financial interests.
Not all liability is the same
Contractors will charge you for their liability insurance. This is a common practice. However, the contractor's liability does not mean you have liability on the land, structure or leasehold space for third-party injuries. The contractor's liability protects them if they cause bodily injury or property damage. As a veterinarian, you have Veterinary Professional Liability (malpractice) to protect you in the event a client sues you for negligence. Contractors carry their own liability for a similar purpose, but never confuse their liability for having your own coverage on a location you own or lease
During construction, builders risk insurance covers a contractor's materials, equipment, and the property where the construction is taking place. The coverage lasts from when the policy starts until a project is complete and the owner signs off on the project.
Construction liability insurance protects a veterinary practice undergoing construction from risks relating to bodily harm and the lawsuits that may follow. A standard construction liability policy can cover:
The critical distinction to remember between builder's risk insurance and construction liability insurance is that builder's risk insurance is more focused on materials, equipment, and property. Construction liability insurance focuses more on bodily injury and lawsuits related to accidents, negligence, or safety issues.
Vetinsure works with vetted strategic partners to help serve the veterinary industry specifically. We provide custom builders risk and construction liability insurance solutions and represent practices of all sizes, including everything from personal, single-building practices up to sizable corporate structures.
If you are looking to construct a new building for your practice, create additional space, or remodel or renovate, Vetinsure can handle all your insurance needs. Give us a call today at (800) 272-1249 to get a quote, or contact us online.