3 Exposures to Consider on a Builder’s Risk Policy
Hard, Soft and Business Income Expenses
The resurrecting construction industry means that builder’s risk submission activity is on the rise. As such, it’s important to understand this line of business. Here’s an overview of some things to consider on a builder’s risk policy.
Construction contracts generally require the building owner or the contractor to purchase and maintain a builder’s risk policy. The policy provides coverage for loss or damage to the unfinished building’s construction materials on the work site during the course of construction, subject to certain restrictions and exclusions. The policy can also be extended to cover existing structures if the project is a renovation. Exposures are broken down into three general parts: hard costs, soft costs and business income or loss of rents.
Hard costs are the tangible assets that comprise the construction project; quite simply, the costs of material and labor associated with a project – also known as “sticks and bricks.”
Soft costs, also known as Delay in Opening Expenses, are usually covered and limited by special endorsements to builder’s risk property policy. Coverage is provided for additional construction
loan interest, real estate taxes, marketing and re-leasing expenses, administrative expenses, and architectural/engineering fees which are incurred as a result of a covered loss – one that causes delay in completion of a project. These expenses can be further broken down into two sub-categories: construction expense and additional soft costs.Read More »3 Exposures to Consider on a Builder’s Risk Policy