When embarking on a construction project, whether it’s a new build, a remodel, or a major renovation, there’s a critical piece of insurance protection that property owners often overlook—Builders Risk Insurance. Unfortunately, many property owners make the mistake of delaying the purchase of this essential coverage, only to face significant financial consequences later on. At Insurance Incorporated, we’ve seen firsthand how costly these errors can be, and we’re here to help you avoid them.
The Risks of Delaying Builders Risk Insurance
One of the most common and costly mistakes property owners make is waiting too long to purchase Builders Risk Insurance. Builders Risk Insurance is designed to protect your property during the course of construction, covering risks such as fire, theft, vandalism, and certain natural disasters. However, the timing of when you secure this insurance is crucial.
If you wait too far into your project—typically beyond 30% completion—many insurance carriers will refuse to offer a Builders Risk policy altogether. This leaves your project vulnerable to potential losses that could have been covered if the insurance had been purchased earlier.
Even if you manage to find a carrier willing to insure your project after significant progress has been made, be prepared for a steep price increase. The cost of Builders Risk Insurance can more than double if you delay purchasing it until later stages of construction. The rationale behind this is simple: the further along a project is, the higher the risks and potential costs of any damage. Insurers price this increased risk accordingly, leading to much higher premiums.
Don’t Assume Your Home Insurance Will Cover Construction
Another critical mistake that property owners make, particularly when performing a remodel or addition, is assuming that their existing home or rental dwelling insurance will cover the course of construction. In most cases, this is not true, especially if the project involves major renovations.
Before starting any construction work, it is very important to verify with your home or rental dwelling insurance carrier whether they will provide coverage during the renovation. In many cases, they will not. This is a big mistake that can lead to significant out-of-pocket expenses if something goes wrong during construction.
To avoid being blindsided, always check with your insurance carrier or agent before starting a project and get their response in writing. This step ensures that you have clear documentation of what is and isn’t covered, allowing you to make informed decisions about the necessary coverage.
The Importance of Planning for Builders Risk Insurance
To avoid these pitfalls, it’s essential to purchase Builders Risk Insurance as early as possible—ideally before construction begins. This not only ensures that your project is fully covered from day one but also helps you avoid the dramatic cost increases associated with purchasing coverage later.
In addition to purchasing Builders Risk Insurance early, it’s important to consider the duration of your project and whether you’ll need to renew your policy. Builders Risk Insurance is typically issued for one year, but construction delays are common, and your project may require an extension.
Before selecting a policy, ask your carrier if they offer renewal terms or extensions beyond the first year. Not all carriers do, and if your project extends beyond two terms, the cost for a third-term Builders Risk policy can become prohibitively expensive. Planning ahead and understanding your carrier’s renewal options can save you significant money in the long run.
The Lender’s Role: Withholding Funds Without Builders Risk Insurance
In addition to the risks mentioned above, there’s another critical reason to secure Builders Risk Insurance early: your lender. Most lenders require proof of Builders Risk Insurance before they release construction funds. If you do not have a Builders Risk policy in place, your lender may withhold these funds, halting your project until proper coverage is secured. This delay can be costly, both in terms of time and money, and could jeopardize the overall success of your project.
Protect Your Investment with Proper Planning
At Insurance Incorporated, we’re here to help you navigate the complexities of Builders Risk Insurance and ensure that your project is fully protected from start to finish. Don’t make the mistake of waiting too long to secure your coverage—doing so could leave your investment exposed to significant risks and unnecessary costs.
If you’re planning a construction project, contact us today to discuss your Builders Risk Insurance options and provide you with a free Builders Risk quote. Call us at 877-428-8778. We’ll help you find the right coverage at the right time, so you can focus on building with confidence.
