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Builders Risk Insurance

Insuring Buildings Under Construction

Many people in Fairbanks choose, and possibly enjoy, building their dream homes, rental units or businesses from the ground up. And why not? In most cases it proves to be easier on the pocket book and they get from it what they put into it. The biggest mistake most people make is not considering insurance to protect what they’re about to put into the building or, in most cases, what they’ve already put into it.

The most common misconception is that insurance isn’t needed until there’s a substantial amount of materials put into a building project. Why would you insure a piece of land that has nothing on it yet? This couldn’t be more wrong. Insurance companies prefer to see that no construction has begun yet and that they’re starting with a clean slate. This means that before anyone decides to lay a finger on a shovel, they had better think about placing insurance on the property first.

Placing insurance on your soon-to-be property is easier than most people may think. All that’s really needed is an idea of how much the owner plans on putting into the project and some basic information about themselves. The sooner a person insures the property, the better the coverage, and premium, could be. In some cases, premiums are as low as $375.00 per year.

If you have already started construction on the property—that’s okay too. This phase of construction would qualify for a Course of Construction or Dwelling Fire policy. These policies require the same basic information that would be needed at the pre-construction phase. One should note that these policies run the risk of having higher premiums and usually do not include coverage for liability, medical, theft of building materials, freezing of pipes, etc. So if these coverages are of big concern, make sure to place a policy before construction.

Coverage can be purchased on residential, commercial or model homes. Some policies include coverage for building materials, trees, shrubs, lawns and even property owned by subcontractors. Most of these policies also cover theft of materials, materials in transit, fire, vandalism, and debris removal. The only coverage not available on any building under construction is liability—so please be careful!

No matter where the project lies there is usually a market that the building can be placed in. The best thing a property owner should do is first place insurance during the course of construction phase to keep premiums low and then again after construction is complete. One of the first things insurance companies ask on applications is “where is the premises currently insured?”. Having current insurance in place continuously proves to be more cost efficient than waiting until something comes up and placing insurance later. Insuring your home during the construction phase will help you secure a homeowners insurance policy when the time comes. Some insurance companies prefer not taking on the risk of a prior uninsured building and will only offer a Dwelling Fire policy, if offering any policy at all, thus possibly resulting in inadequate coverage for the building owner.

It doesn’t take much to get these policies in force so that you can soon be on your way to building your dreams. If anything, insuring a building from the get-go can be more cost efficient and less of a headache in the long run. In the end, you’ll be glad you did—because we all know how fun construction can be all on its own!