General contractors, contractors, and subcontractors are commonly required to carry contractors insurance by the various laws and businesses they work for.
Contractors all risk (CAR) insurance consists of a special set of policies that protect property where construction is being done for the duration of the construction project. Some CAR policies cover more than others, so it’s important to know how to compare different types of builder’s risk insurance before you begin construction.
1. Determine the length of the project.
CAR policies typically only last until the project has been completed. It is therefore important to estimate the length of the project accurately. If in doubt, over-estimate by a small amount so that there is margin for error. Remember that grossly over-estimating the length of time may result in unnecessary costs.
2. Convert your insurance after the project completion.
Discuss the option of converting your CAR policy to permanent property insurance after the project has been completed. Your broker at MBI will be able to advise you on the best course of action to follow here.
3. Review your team.
Make a list of everyone involved in the project and only insure those individuals. CAR insurance normally covers the property owner, the general contractor and some subcontractors, like architects and engineers. Its important to double-check exactly who is and who is not covered on your CAR policy. Remember it may be much more cost effective in the long run to cover a few extra parties, should you experience a loss.
4. Calculate your budget.
A detailed review of the project cost is highly recommended. This should include costs for labour, building materials and incidentals. This basic calculation can be used as a yardstick for the calculation of your CAR policy.
5. Compare all-risk policies to specified-peril policies
A specified-peril policy will only cover certain items as indicated by the policy itself. Natural disasters and damage caused by incidents on surrounding properties are usually not covered.
All-risk policies, of which CAR is one, cover a wider range of damage to property undergoing construction, including natural disasters. All-risk policies cost more than specified-peril policies, but will provide more peace of mind for bigger or long-term projects.
6. Specify the structures under construction.
Consider how many structures you need to insure when comparing policies. Some CAR policies require you to list each structure on the property being insured and costs can vary based on the number of buildings.
7. Know if fixtures are covered.
Find out what fixtures and components of structures are included in the CAR policy. Some policies charge extra to cover geysers and electrical or air conditioning systems. Compare policies that include these structural fixtures with ones that list them separately.
8. Find out about amendments.
Endorsements are amendments or additions to a standard policy. These cover specific acts of nature or damage that could occur, but can cost more to add to a basic policy.
Consider amending your policy if you are building in an area that is prone to flooding, riots or wildfires.
9. Compare exclusions.
It’s just as important to consider what is excluded from your CAR policy as it is to know what’s covered. Many policies exclude pipes, foundations and underground structural components. Some also exclude fences, walkways and bridges. Determine whether you need to pay extra to include these elements.
RSAB prides itself in being an expert on contractors all risk policies. We will be happy to go through this list with you if there is any that is unclear.
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