While most Homeowner Associations recognize the need for standard insurance policies to protect their property, all too often, construction and renovation projects are not covered under standard property policies. Unfortunately, these types of projects can cause significant risk to the HOA, its owners, and the contractors. Whether the project is large (millions of dollars) or small (thousands of dollars), a Builders Risk policy must be in place to protect all those involved.
Builders Risk Insurance provides valuable protection for projects such as including new construction, remodeling and renovation; roofing, siding or decking projects; interior plumbing or electrical work; and maintenance related projects. In addition, Builders Risk Insurance is a specialized insurance that protects from theft, vandalism, fire, wind and lightning, and other threats at cause risk to the project and site while construction is in progress.
It’s an insurance policy that protects an organization’s insurable interest in materials, fixtures and/or equipment being used in the course of construction or renovation of a building or structures in the event those items are damaged in an insurable loss.
Not necessarily. Typically standard property policies are not rated on buildings during the course of construction. Several policies typically have exclusions related to course of construction and materials that are purchased. Contractors being listed on the property policy is also another issue that arises.
It depends on the project size and length of time. They are typically more expensive than a standard property policy however the risk of a loss is much higher and therefore the reason why it costs more. Building it in the project budget up front is the best way to not forget or be alarmed at the cost.
BEFORE THE PROJECT STARTS. We recommend to reach out to an agent that is knowledgeable with regards to Builders Risk policies and can read the contract between the insured and contractor PRIOR TO IT BEING SIGNED.
In most cases, 30 day extensions to the existing policy can be endorsed however the premium is 100% earned no matter if you only use 1 day of that extension.
It is really not in your HOA’s best interest for several reasons. 1. You have no control over the policy. What if the contractor doesn’t pay the premium or doesn’t write the policy correctly? The HOA has no control to take over the policy. 2. What happens if the contractor does work out or goes out of business without any notice; the Builders Risk policy goes with them. That means that the Association is stuck, mid-project, with no coverage and could end up costing them 4-5 times the amount if they find another carrier to offer a policy midterm with little coverage. Our advice? The HOA should take the policy out themselves and negotiate terms based on these extra costs that are incurred.
No. There are other policies which are extremely more expensive that can provide coverage specific to contractors work. These are typically called ‘Wrap policies’, and very expensive coverage.
Your HOA should educate and protect yourselves before work starts.
As an HOA, new construction or renovation can be a major investment. Protect your HOA’s investment with a well-designed Builders Risk insurance policy today. Call or email Sara Eanni at ABI Insurance.