Construction Insurance

Construction Insurance is about how a leading residential Architect discusses the sort of insurance Owners need when building their house projects.

Every Client that comes to HOME ARCHITECTS ® believes that only their Contractor needs to have insurance during the construction of their new custom house project. They are dead wrong. Fortunately, this architectural firm knows how to guide them to have the protection they need.

Why are the Clients dead wrong? Well, for starters, did you know that if you own your land, that whatever is built on it, even while it is being built, you own? This of course assumes that there are no liens on the improvements and that you have paid your Builder to construct the features, as you are moving forward on your project. Therefore, YOU own the improvements, even while in progress, not your Builder.

So here’s a question for you: why would you want to allow your Builder to have the Builder’s Risk insurance policy on your new house?

If something happens that results in a claim being filed with an insurance company, do you really want for your Builder to be the beneficiary? You’ve ALREADY PAID him for what he/she has built! So you want to turn over the value of what you own to them? Does that make any sense? What would happen if this occurred near the end of the project, and your nearly done new house burns down? And your Builder, rather than you gets the insurance settlement check? Well, suppose your Builder decided to take those additional funds (after already being paid to build the house once) and to perhaps move to the Cayman Islands? Thanks for the retirement fund!

Never thought of that, did you? Well, now you know. Most Licensed General Contractors are responsible, hard-working, fine, upstanding people. But why would you want to put yourself into such a position? Wondering what you SHOULD do? Okay, here it is:

YOU get your insurance company to make YOU the beneficiary if YOUR under-construction house burns down, or blows away, or is vandalized or any other calamity (including earthquakes) and other bad things that could happen. And what type of policy is this called? This is the Builders Risk policy. What’s that? You say you’re not the Builder? This is probably why this is so confusing to so many people. THAT DOESN’T MATTER. The Builders Risk policy will benefit whoever takes it out on the project under construction. And you definitely want to be the person who gets paid if the house is damaged.

So, what if something happens? Well, you make a claim, an insurance adjuster will come and visit your project site and assuming everything goes well, you get a nice big check to cover your loss.

Now what? You pay your builder with the money you get to rebuild & repair the damage. So, you’re right: in the end, the Builder does get the money, only this way, YOU’RE CONTROLLING the disbursement of the funds. You say who does what and when. And that’s a very important distinction when you’re talking about hundreds of thousands of dollars, possibly more.

Alright. So now you’re saying: “But hey! Doesn’t my Contractor need some kind of insurance? He or she definitely does:
1. Workers Compensation
2. General Liability Insurance

Why would you care about the Contractor having Workers Compensation Insurance? Pretty simple: if he doesn’t have that, and one or more of the people he has working for him on your land hurts themselves: falls, cuts something, breathes the wrong fumes… there are thousands of ways to get injured on a construction site, then guess who is ultimately liable to take care of those people? YOU. Hard to understand? It’s not, really: you essentially invited those people onto your land to do something dangerous. You become responsible, if their employer (the Builder) does not have them covered by his Workers Compensation insurance.

For this reason: YOU SHOULD NEVER HAVE ANYONE ENTER YOUR PROPERTY AND PERFORM ANY WORK WITHOUT THEM HAVING THIS TYPE OF INSURANCE. Anything can happen. Don’t assume “Oh, it’ll be okay.” It may not be. And there are pratfall artists who can take advantage of you, faking injuries that are almost impossible to document, along with legitimate issues. So: demand to see the Acord insurance form before allowing anyone on your land to do anything.

And you’re not done: You need a General Liability insurance policy on your land, even before your house is done being built. That helps protect you, if someone does come onto your land and falls off a floor or whatever. And, here’s the good part: if you already have a Home Owners Insurance Policy, the chances are, it will cover you and your unbuilt land, by means of extension of what you own. Pretty cool! But verify this with your insurance broker to make sure.

Choosing the right Architect can make all the difference in your house project. Not knowing the above could have resulted in a catastrophic loss for you. Now you know better. And this is just one of thousands of things that can and do happen, every day. Building a house is a very complex and risky business. Make the right choice: hire a Licensed Architect who specializes in the design of custom houses:

CONTACT FOR CUSTOM HOUSE ARCHITECT:
Rand@HomeArchitects.com 828-269-9046 www.HomeArchitects.com