A property insurance policy protects a building and the contents against losses that can result from damaging events, such as fire, flood or natural disasters. If the building were to be destroyed, the property owners will be able to rebuild and replace the contents. When a building is under construction, the owners will need property insurance, but they will specifically need to purchase a builders risk policy.
This type of policy will cover the building as it is being constructed. After it has been built, the policy usually expires. The reason is because buildings under construction have specific risks that buildings currently standing do not have. Some of these risks are as follows:
These policies cover the contractors' materials as they are being transported to the construction site. For example, if there is an accident on the way to the worksite and the materials sustain some damage and need to be replaced, the policy covers them. The policy also protects the materials after they have safely arrived at the site. These materials will need to be left at the construction area and are subject to being damaged in a number of ways.
The policy covers construction of a building, but it is not a requirement that the owners and contractors build an entire building from the ground up. This means that if someone is adding a room onto an existing building, they can purchase this policy to cover just the addition. If they are improving an existing property in anyway, this policy will cover the work being done, such as a remodeling job on a house.
As with other types of insurance policies, people who purchase this insurance policy will be able to set a limit on the amount of money they will receive in the event they need to file a claim. Unlike other policies, they will not be able to choose between the Actual Cash Value (ACV) and the Replacement Value (RV). Only the ACV applies in this case, but it is rare that there is much in the way of depreciation for new materials that are being used to construct property.
How much people will pay for their premiums will depend on a couple of factors. The cost will be decided based on the type of building to be constructed, and it will also depend on where the builders are building the property. Typically, policy holders will be required to pay a deductible after they have filed a claim.
The length of the policy is flexible because people can insure their building projects in different terms. Typical time periods are for a 3- month policy, a 6-month policy or a yearlong policy.
Getting an insurance contractor for your building project is the best way to proceed.