A course of construction insurance policy will cover a contractor while a house is under construction. It is important for contractors to have this coverage for any project that is being undertaken. Contractors should be aware that this coverage is different from a course of renovation policy. Getting the insurance can be costly, but it is a necessary evil.
Construction Insurance Versus Renovation Insurance
It is important that a person can distinguish between a construction job as opposed to a renovation job. Construction is considered anything that begins with the frame of a house. Renovation is considered anything that is more than 10 percent of the value of the existing home. Contractors should get in touch with their insurance provider to determine what kind of work is being done. It can be the difference between getting coverage and going into a project without a safety net.
What Will My Policy Cover
Your policy will cover just about any type of loss that you can think of. The losses are generally divided into two categories. The first are referred to as hard losses while all other losses are referred to as soft losses.
A hard loss is something such as a building burning down. Fires can occur rather easily when there are many people working in and around a property. An oily rag can set off a fire as well as a lightning strike from a passing storm.
Vandalism and other forms of theft are also covered. If you leave the house unoccupied for a long period of time, you may find that criminals will strip the home of copper or other raw materials.
Soft losses are the expenses that you incur because your project has been delayed. Interest that accrues on your construction loan, added attorney fees and extra insurance premiums will generally be covered by your policy.
Some policies will include coverage for certain losses that other policies will not. Make sure to read your policy carefully to see if anything has been specifically excluded from your policy.
How Much Damage Will My Policy Cover
A construction insurance policy can come in handy if anything should happen. This is because you can get coverage for up to $5 million. However, this makes insurance rather pricey. It isn't uncommon to see insurance premiums cost hundreds or thousands of dollars a month. This is something that a contractor needs to factor in when trying to determine the profit margin for building a new home.
What Will My Policy Not Cover
It cannot be stressed enough that you need to read your insurance policy to determine what is not covered in your own unique situation. However, there are a few common items that are not covered by this type of policy.
Poor construction quality is not covered under this type of policy. For example, if your building collapses because you used substandard materials, you will be responsible for the loss. Insect damage is another item that is generally not covered.
Ground shifting under the construction site may also cause you to be responsible for your losses. Therefore, it is important to build with quality products in a place where nature cannot get to it.
Getting course of construction insurance can provide a contractor with some financial relief should anything go wrong. The contractor will not be on the hook if a fire, flood or some other natural disaster happens to take out the home. This is a good thing because an accident can happen at any time. As long as the work being done is of high quality, the contractor should not have to worry about losing his money.
Leading insurance expert Carolyne Roehm has written extensively about the insurance industry. She is currently a guest blogger for numerous insurance websites. Her most recent postings can be found at http://www.CanonInsurance.com.
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