Whether you work in the construction industry, or are just a homeowner renovating your house, construction insurance can be of value to you. It is becoming increasingly important to add other perils in addition to fire, extended coverage and vandalism to policies written to cover buildings in the course of construction. Some insurers have developed a form to cover such buildings on an “all-risks” basis. This form provides coverage for the usual fire, extended coverage and vandalism perils, as well as broad collapse coverage including subsidence and settling, flood, earthquake and landslide coverage at the job site as well as in transit, and broad water damage coverage. The policy usually is written with a deductible, and may cover projects of very high values. Such covered risks may include:
- High-value, mobile equipment;
- Outdoor work, with consequent susceptibility to weather and theft;
- Use of hazardous equipment under ever-changing conditions;
- Time-sensitive work, susceptible to strikes, subcontractor failure, and other delays;
- Vulnerability to financial markets;
- Design build operations and the associated risks; or
- Various types of construction contracts from standard to manuscript.
Since an all-risk builder’s form is not a standard policy, there are many variations of this form. The broadest forms are those that provide coverage for both flood and earthquake perils, with separate limits for each. These policies may also include coverage for “resultant damage” as a consequence of design error and/or faulty workmanship. There are also surplus markets available that have developed even broader forms that include not only the “resultant damage” feature, but also damage done to the building as a result of the design error itself. The policy is written subject to the normal individual exposures of the builders risk form, plus an additional premium for the design error endorsement. There are usually two deductibles, one for the builders risk and a separate one for design error losses. Various endorsements can also be purchased for special circumstances, such as:
- Contractor Equipment Floater;
- Builder risk / Course of construction / Business Interruption / Delay;
- Crime / employee theft; or
- Kidnap & ransom for foreign projects.
- Political risk insurance for foreign projects.
General contractors may also purchase liability insurance for their operations and those of subcontractors on large construction projects. Many provinces have criteria for the approval of such programs which must meet certain contract cost requirements. The inclusion of wrap-up coverage brings all construction insurance coverage and costs into one policy eliminating gaps of protection and non-concurrency of limits and policy language. Building owners may also purchase this insurance on behalf of other parties.
* All coverages are subject to limitations and exclusions. Please speak to a licensed insurance agent, read the policy wordings and the certificate of insurance for definitions, limitations and exclusions.