What is Builder’s Risk Insurance?
This is a shield against hazards that might happen during construction and protects your project from the ground up. Builder’s Risk is designed to shield investments and ensure everything can progress. Property owners, real estate developers, investors, architects, and builders all need it in case there are any kind of setbacks.
Builder’s risk insurance is essential for damage to equipment or partially completed work due to accidents, fire, weather-related problems, material defects, and faulty installation or workmanship. Each policy has terms as to when coverage ends, and the endpoint is when the project is completed.
Between celebrating the successful completion of a project and the formal termination of coverage, knowing what triggers the endpoint is key to maintaining continuous coverage for your valuable asset.
What is Installation Floater Insurance?
While a site is under construction, contractors and subcontractors face many risks and need to protect themselves from financial loss and ensure that their tools in transit are protected before they begin the installation process.
Installation Floaters protect equipment and materials that people use in the course of their work. This type of protection can save a contractor from damage to materials if there’s an accident on the job site.
If you’re a contractor installing drywall, a fire breaks out and your extra tools are destroyed on the job site; most commercial property insurance policies offer limited coverage, your best option is to get Installation Floater coverage because it provides an extra layer of protection. Because Installation Floater provides more limited coverage, it is typically more affordable than Builder’s Risk. However, the financial risk that the builder is exposed to is also greater. Contractors are best suited for this type of coverage if they’re performing specific installation tasks, or subcontractors who are completing a larger project and accepting limited liability.
Differences Between Installation Floater and Builder’s Risk
Contractors have a lot to worry about during a construction project, you can ask them and they will always think of something. Not only do they have to meet deadlines, but there’s always the worry of protecting equipment and keeping an eye on the weather.
Depending on the project, you may have to choose between Builder’s Risk and Installation Floater, or even both if what you’re working on requires it.
However, when it comes time to get coverage, there are a few key differences to keep in mind:
- Type of Project: Builder’s Risk is more comprehensive and is typically an option for much larger projects. This policy is most often used when the financial risks in the outcome are greater. The Installation Floater, on the other hand, is a policyholder for materials and equipment on projects named in the policy.
- Policy Coverage: There may be times when the equipment is really expensive so Builder’s Risk may not be able to cover it, in which case it is better to think about an Installation Floater to cover those specific tools and equipment.
Another important difference is that the Installation Floater is less expensive than the Builder’s Risk, but its coverage may be narrower. The contractor may end up being more exposed to losses that aren’t covered.
How to Choose Between the Two
The decision between the Installation Floater and Builder’s Risk depends on the level of risk, scope of work, and cost assessment.
- In terms of risk exposure, Builder’s Risk includes vandalism, fire, theft, and weather damage. Installation Floater tends to leave the contractor with less coverage if there’s damage to the structure.
- Contractors and subcontractors working on certain HVAC systems and plumbing need Installation Floaters. However, if you’re in charge of the entire renovation or construction project, it’s better to have both materials and structure coverage.
- One of the main advantages of the Installation Floater is its lower cost, but it only covers certain materials that are installed. Although more expensive, Builder’s Risk covers the entire project, including labor and soft costs.
- Installation Floater covers tools, equipment, and materials in transit, on-site, or about to be installed, while Builder’s Risk covers the entire construction (including materials, supplies, and fixtures until the project is completed).
Project Examples that need both Installation Floater and Builder’s Risk
The better option if you only need specific materials or equipment installed is the Installation Floater. These are installations for: HVAC, Electrical, Plumbing, Flooring & Interior, Signage & Display, Renewable & Solar Panels.
When significant renovations are being done or the entire structure is being completed, the best option will always be Builder’s Risk. The most common projects are New Home Construction, Commercial Buildings, Major Renovations & Expansions, Bridges & Infrastructure, Multi-Phased Developments, and Hotel & Hospitality.
Conclusion
Working in the construction industry comes with many risks and challenges, so it’s better to give your team stability and have your tools and equipment insured. When you get Builder’s Risk or Installation Floater, you’re not only protecting your project while it’s being done, you’re protecting it before it’s done.
Call to Action
Contact an advisor to find out what’s best for your business. We’ll let you know if you need both.
FAQs
Does Builder’s Risk Insurance cover subcontractors’ materials and equipment?
Builder’s risk insurance generally covers materials permanently installed in the project, but subcontractors may need an installation floater to protect materials for which they are responsible before installation or while in transit.
If I already have Builder’s Risk Insurance, do I still need an Installation Floater?
It depends. Builder’s risk insurance covers the structure and job site, but it may not cover materials in transit or awaiting installation. If your job involves transporting and installing high-value materials, an Installation Floater can provide additional protection.
When does coverage end for Builder’s Risk and Installation Floater policies?
Builder’s Risk coverage ends when the project is completed or occupied, while Installation Floater coverage ends once the insured materials are installed and become part of the structure.
What types of projects require a Builder’s Risk versus an Installation Floater?
Installation Floater coverage ends when the insured materials are installed and integrated into the structure, but Builder’s Risk coverage ends when the project is finished or occupied.
Which policy is more affordable—Builder’s Risk or Installation Floater?
Installation Floater Insurance is usually less expensive because it covers only specific materials rather than the entire project. Builder’s risk insurance is more comprehensive and therefore more expensive.
Does Builder’s Risk Insurance cover equipment in transit like an Installation Floater does?
Not always. Builder’s risk typically covers materials once they are at the job site. An installation floater extends coverage to materials and equipment while in transit and awaiting installation.
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