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Planning For Disaster: Builder's Risk Insurance

Builder's risk insurance protects you from both property damage and liability damage. Many people have difficulty justifying the expense of insurance, because in most cases it is not necessary. However, insurance is a way for the members of a community to split the cost of fixing the problem once a disaster occurs. When you elect a policy with an insurer, you are splitting the cost of disaster with the community who also has elected that insurer. And, if you are the one filing a claim, you will be happy you did.

Legal Requirements

All 50 states have insurance requirements for both individuals and businesses. These requirements protect other businesses and individuals, not necessarily your business, by assuring you can pay if an accident happens to someone else. However, ultimately, you will benefit because you are often the recipient of damages as well. States typically require a certain amount of property insurance, a certain amount of liability insurance and a certain amount of worker's compensation insurance. All can be achieved through a builder's risk insurance policy. If you fail to meet these requirements, you may not be eligible to do business in your state. Further, contractors may refuse to work with you. Meeting these requirements is the only way to operate legitimately in your state.

Property Protections

The first protection in builder's risk coverage is protection of your property and the property of others. If any of your property is damaged during a project, you may receive a reimbursement through your policy. The policy may only protect you if the damage is the result of certain incidents, for example natural disaster. If you or one of your workers has a hand in causing the accident, you may not be eligible for coverage. However, if you have specifically elected to be covered even when you are at fault, you can still recoup your losses. For instance, you can choose to add an electrical contractor to your additional insured list, meaning you will be covered if the contractor causes damages. The property protection will also cover your losses if, for example, you damage the neighbor's property while building. 

Liability Protections

Often, liability is a bigger threat to builders than property damage. Liability is the threat of lawsuit that arises if you cause harm to another person or property. In liability cases, you must be shown to be negligent, meaning you did not show prudent caution. If you have exposed wires, uneven steps, or other safety hazards at your build site, you may be at risk for a liability law suit. While exercising loss control practices can prevent some liability claims, there are always unforeseen angles that may threaten your wealth. Further, it is not uncommon for a plaintiff to make a claim even if you are not at fault. While you may win the lawsuit, you will have to pay lawyer’s fees in a large sum if you do not have insurance. Insurance can cover your lawyer’s fees and any settlements.

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