Today’s edition of Insurance Straight Talk is for those who are involved in flips or new home construction.
What kind of insurance do I need?
When we’re talking about property, whether it’s a flip or new construction, the owner should want (and the lender will require) to protect the real property from hazards. Enter hazard insurance. This can be accomplished with Builders’ Risk or a Dwelling Under Renovations-type policies and in some cases with Home Under Renovation policies. And if the property is in a flood zone, a Flood policy will also be required.
The owner of the property should have premises liability coverage as well.
And depending on who’s acting as the general contractor, there may be a need for General Liability and Workers’ Compensation policies as well.
What’s the difference between Builders’ Risk, Dwelling Under Renovations, and Home Under Renovations-type policies?
A traditional Builders’ Risk policy is a commercial insurance product written on an Inland Marine policy form. This form covers buildings under construction and their foundations. In addition, machinery, equipment, building materials, and supplies (even those owned by sub-contractors) can be covered if they are intended to become a permanent part of the building and are located within 100’ of the building. This form has the broadest coverage and generally covers all losses unless specifically excluded. However, with standard market Builders’ Risk policies, liability is not an option.
A Dwelling Under Renovations policy is typically written as a Vacant DP-1, a type of Dwelling Policy or Dwelling Fire Policy, a property policy available for owners of dwellings. Usually used for those dwelling risks that are not eligible for the Homeowners package policies. There are three groupings of covered causes of loss available. Form 1 provides protection for basic causes of loss. Form 2 provides broad and Form 3 provides special perils coverage but are usually not options when the dwelling is not occupied. Personal liability protection may be available as an endorsement to the Dwelling policy but is not automatic.
Some carriers may offer to write a traditional homeowners (HO-3) policy, a broad package of homeowners insurance that, with exception of earthquake, flood, military, and nuclear activity, covers all of direct loss to a residence that is not specifically excluded. It also provides personal property protection on a specified cause basis, as well as liability insurance. When under construction, a home under renovations endorsement is added. There is typically an option to add limited coverage for theft of building materials.
If I get a standard market Builders’ Risk policy, how can I cover my liability?
If getting a standard market Builders’ Risk policy, which doesn’t offer liability coverage, one can protect their liability in one of two ways. The first option, is having a home (HO-3), condo (HO-6), or tenants (HO-4) policy with a carrier that offers an endorsement to extend or automatically extends liability coverage to the property under construction. The second option is to obtain a premises liability policy.
What if I’ve got a general contractor, doesn’t their insurance cover me?
If you’re hiring a general contractor, first and foremost, make sure they’ve got current General Liability and Workers’ Compensation policies and get certificates of insurance listing you as the certificate holder with Additional Insured status if possible.
As these policies will not cover the property itself, you’ll still need your own property and liability polices.
What if I’m going to be the general contractor?
In addition to the property and liability policies mentioned above, you’ll want to have a General Liability policy for sure. And you might want to consider a Workers’ Compensation policy as well. You’ll also want to make sure that any subs hired have their own General Liability and Workers’ Compensation policies with limits equal or greater than your own. You’ll want certificates listing you as certificate holder and Additional Insured.
Contact Olde Liberty Insurance today to discuss your Connecticut insurance needs. We can have a call or sit down face to face and discuss your needs and tailor a no-obligation, customized quote for those specific needs. And with access to some of the most reputable carriers in the business, we’ll find you the best option you’re your situation.