What is a Course of Construction Insurance Policy

In a construction project, anything can actually happen while in the course of its undertaking and if you are financially responsible for the project, it would be wise to protect your investment. The Course of Construction Insurance policy, also known as the Builder’s Risk policy is designed to provide protection for buildings under construction. Generally, it covers the value of the property under construction from the time the project began until it is ready for occupancy or moved into. The contractor’s value in materials at the job site before installation and the materials in transit intended for the job are its main issue of coverage.

Course of construction insurance policies are also made to cover the whole structure for new construction or merely for rehabilitation projects. It is also used to cover specific projects like a kitchen remodel, a new deck or a room extension and addition.

The Typically Coverage of this Insurance Policy

A Course of Construction Insurance policy or Builder’s Risk policy can be described as an inland Marine insurance policy. It provides protection against the basic perils such as wind storm, lightning and fire, hail, vandalism and theft. However, the policy provides limited coverage for structural collapse during construction.

Standard Policy Exclusions from its Coverage and Recommendations

There are standard exclusions from coverage in this type of insurance. Such exclusions include; employee theft, mysterious disappearance or loss without proof, damage due to earth movement, weather damage to property in the open, water damage, war, damage due to government action, terrorism, contract violation penalty, voluntary parting or separation, mechanical breakdown, damage caused by aircraft, watercraft or automobiles.

This insurance policy does not also include coverage for bodily injury or property damage of others. A separate insurance policy that offers this type of protection is the General Liability Insurance policy.

This insurance policy does not cover mold abatement problems, damage caused by insects or vermin such as pest and parasites, damage resulting from faulty design and planning, workmanship and materials, damage caused by plants, trees or shrubs and debris removal.

In purchasing your insurance policies, you can inquire from your insurance broker about the All Risk policy. This policy typically covers theft, fire, explosion, vandalism, water damage, commissioning and testing, mechanical or electrical breakdown or collapse. You can still get protection against the perils excluded in the Builder’s Risk Policy.

“Soft Costs” Coverage-Course of Construction Insurance Policy

The Soft Costs in this insurance policy is referred to the expenses for the building construction process that are other than materials. These soft cost expenses include; reimbursement for losses caused by a delay in completion of the project. Such losses include; interest on construction loans, consulting fees, real estate taxes, additional insurance coverage, refinancing charges, overhead expenses, attorney and legal fees, accounting and advertising and/or marketing fees, equipment rental, and architectural & engineering expenses.

Sometimes, a direct loss to the building may result in other unavoidable losses. But not all Course of Construction Insurance policies cover the soft costs. However, soft costs coverage pays only a portion of these items the contractor must put up with as a result of a delayed project.

Insurance claims in this case are settled on the Actual Cash Value basis for Builder’s Risk losses, up the maximum limit of the coverage.

The Course of Construction Insurance Covers Who

Typically, the Contractor or Developer of the property is the Named Insured of the Course of Construction Insurance Policy. But there also cases where the building owner or home owner is the Named Insured if they are responsible for insuring the property while under construction.

Moreover, like any other Property Insurance policy, additional insurance coverage can also be extended to a mortgagee or lien holder in this insurance policy.

For more information about this topic, ask your insurance broker to explain fully the coverage of the Course of Construction Insurance Policy.