As a contractor, you probably know that construction projects can get damaged from multiple hazardous events. Such losses could impact not just your company, but also you clients. The financial ramifications could prove hefty. One key to avoid such losses is to get builder’s risk insurance. Still, you have to structure your policy using the correct limits. How do you know how much coverage is enough?

Setting your policy limits involves getting enough money to cover your losses. Often, this isn’t hard. However, you’re going to want to approach it from a couple of different avenues.

Standard Policy Limits

Builder’s risk insurance helps contractors and others in the construction business. It essentially covers properties under construction.

Storms, wind, theft and countless other hazards might damage the building under construction. Those same hazards could also damage materials you plan to use in the process. You don’t want to have to lose time and spend more money trying to replace these items and continue the job. Builder’s risk insurance will often pay for replacement materials. Still, how much coverage do you need?

On a basic level, you need enough protection for the full value of the project. That means whatever amount of money it will take to complete the entire job, that’s how much coverage you need. You can usually get this value from your construction budget, receipts and cost estimates. However, it’s always a good idea to inquire about limits that are a bit higher than the bare minimum. You might want a bit extra coverage just to catch any loose costs that might slip through the cracks.

Extending Your Coverage

No standard builder’s risk policy will cover everything on your project. At times, you’ll likely need to extend your coverage to other sensitive items. Ask your insurance agent about extensions to your policies. These might include:

• Coverage for lost blueprints or construction costs
• Debris removal protection
• Protection for items in transit to the construction site
• Coverage for scaffolding

Keep in mind, exclusions will still likely exist, even with high policy limits. Your builder’s risk coverage likely won’t cover tools or mechanical breakdowns. It also won’t include liability coverage, or damage from certain weather like floods. Furthermore, if you break your contract, don’t use this coverage to deal with the penalties.

Start your project knowing you have appropriate coverage for your materials. Ask one of our agents about the most appropriate builder’s risk insurance for your needs. Make sure you adjust and extend your policy to adequate limits.