Understanding Construction Insurance in Red Deer
Construction insurance can be divided into two categories – property insurance (first party coverage) and liability insurance (third party coverage). Both coverages are project specific.
Property insurance for new homes or buildings under construction as well as homes or buildings undergoing significant renovations, are covered under a Builder’s Risk (also referred to as Course of Construction) policy.
Builder’s Risk policies provide coverage for loss or damage to materials, fixtures and appliances that are intended to become part of the structure. These policies can also include coverage for temporary structures, equipment in transit, equipment breakdown during testing and commissioning and a form of business interruption (available for commercial builds, it is for loss of revenue due to physical loss or damage to project resulting in delay in completion date). Property coverage is All Risks and includes damage by fire, theft, vandalism and/or severe weather. Flood and earthquake coverage can also be added.
A few things to consider:
- When to purchase – The policy should be purchased before construction of the foundation begins, although policies are available for some projects that have already started.
- Who should arrange coverage – Usually the General Contractor arranges the coverage but it depends on the terms of the contract. In any event, the General Contractor should ensure they are listed as a Named Insured on the policy along with the property owner.
- Renovation – When doing a renovation, the Builder’s Risk policy can cover either just the renovation and/or damage to the existing structure
Along with first party coverage for damage to the property, liability insurance should also be purchased. There are a few ways to approach this:
- Course of Construction policies can also include premises liability coverage for the owner. This would mean that bodily injury or property damage caused by the negligence of anyone other than the owner of the property involved in the project would have to be covered under their individual policies.
- WrapUp liability policy includes coverage for all the stakeholders (including the general contractor, sub contractor, architect, engineer) which eliminates the need to ensure that everyone has a current policy with the appropriate limits of coverage.
WrapUp policies can also include a completed operations extension for either 12, 24 or 36 months. This is an important extension because a claim is only covered by this policy if the claim occurs during the policy period, and claims can occur after the project is completed.
For complete information it is best to discuss your needs with your insurance broker.
Looking to join an industry organization in construction? Check out BildCA in Central Alberta and HAVAN in Vancouver
