BuildFax, an organization that collects construction information on millions of U.S. properties, noted that household remodeling projects have consistently risen for the last 23 months. As a result of declining home values, many are opting to stay in their houses and make the needed modifications. Additionally, buyers are purchasing foreclosure properties at rock bottom prices and remodeling to fit their needs. With so many construction projects under way, it's important that homeowners are aware they may need to purchase Course of Construction Insurance or, as it is sometimes called, Builder's Risk Insurance. A Course of Construction policy can be purchased by the property owner or contractor for a new construction project or a remodel. Although not always required, certain state or local building codes require it before construction can begin. In addition, if the homeowner is taking out a loan for the project, his or her bank will most likely require that a policy be purchased. What is covered under this additional policy? Two Different Types of Policies Policies are divided into two main categories, All Risk and Specified Peril. Although it costs more, an All Risk policy will provide the homeowner and contractor with the most protection. It covers all risks except those specifically excluded in the policy. Conversely, a Specified Peril policy covers only those risks specifically outlined in the policy. For example, if an owner has a Specified Peril policy that covers damages caused by lightening and his or her house is hit by lightening, the damages would be covered. However, if the lightening hit the home next door, causing a fire that spread to the house under construction, the damages would not be covered. Fire protection was not specified in the policy and the peril, in this case lightening, did not occur to the specified dwelling. It hit the house next door. If the homeowner purchased an All Risk policy, the damages would be covered unless the policy specifically excluded fire damage. All Risk policies offer a much broader range of coverage. If the contractor is purchasing the policy, homeowners would want to specifically ask what type of coverage was purchased. What Risks are Included? Coverage varies, but most All Risk policies protect the project against fire, wind, lightening, hail, theft, vandalism, snow and rain damage, other types of water damage and demolition. In addition, owners can request additions or extensions to their policies. For example, a rider may be purchased to protect materials while they are being transported or stored. In certain areas, earthquake and flood extensions can be added to a policy. Lost labor hours are also covered. For example, if someone vandalizes the property, destroying materials that must be reordered, the owner or contractor can be reimbursed for the time lost. It is important to note insurance companies will not cover damages that are the result of poor workmanship, materials or architecture. Additionally, employee theft, fraud, contract penalties or time lost complying with government regulations are not covered even if the owner was unaware. Thus, owners should be sure they are hiring a reputable contractor. All Risk does not include liability coverage either. Property owners should verify their contractor's Worker's Compensation coverage before the project begins. What Structures are Included? What if the property includes a dock, fence, pool house or other structure? Policies only cover the buildings and structures involved in the construction project. Equipment attached to the dwelling under construction is also covered, including furnaces, boilers, and security and electrical systems. Structures or fixtures not attached are not covered, including walkways, fences, pools, sheds, barns, docks and landscaping. October 2011 saw a home renovation rate that was 40 percent higher than October 2010, according to BuildFax. To ensure a smooth project, homeowners should talk to their insurance company about adding a policy specifically for the estimated remodel time-line. Carolyne Roehm, a leading insurance specialist, has written extensively about trends and current topics related to insurance. Carolyne has over 12 years of experience. Ms. Roehm is pleased to now act as a blogging expert for a variety of insurance related websites, magazines and forums. Carolyne's newest blog posts regarding builders risk are available to the public. Click here.
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