Your Home Addition: Check Insurance Coverage

Photo by Dave Morris

As an owner-builder, you want to make sure you have insurance coverage for your new project both during and after construction.  This insurance should protect you in case of fire and weather damage, theft and accidental injury.  There are several different types of insurance available to protect you…let’s take a look at each.

Builders Risk Insurance: Builder’s risk is a type of property insurance that provides coverage for physical damage to the structure during construction. This type of coverage typically indemnifies you against losses due to fire, vandalism, lightning, wind, and similar forces during the construction phase. It usually does not cover earthquake, flood, acts of war, or intentional acts of the owner.  The owner-builder typically buys this insurance.  If you decide to hire a general contractor however, you can write into the contract that he is responsible for obtaining the insurance.  Builder’s risk insurance is also commonly referred to as Course of Construction Insurance. 

General Liability Insurance: General liability insurance covers you from liability in the event that someone is injured on your job site.  The construction site is a dangerous place that has many hazards including falling objects, trenches, fall hazards…etc.  So, check with your insurance agent to get the proper coverage in the event that an accident occurs.  One accident can quickly negate all of your hard work through high legal fees…so don’t overlook general liability coverage.  Your agent will also give you the requirements for any subcontractors that will work on your project.  I have typically required my trades to have a minimum of $1 Million in general liability coverage with me being named as an additional insured on their policy.  You will want to get copies of these policies from each subcontractor prior to starting any work on your project and check to make sure the coverage and policy period are correct.

Workman’s Compensation Insurance: This is state regulated so the location of your project determines what type of coverage you might need.  Workman’s compensation insurance will cover lost wages, medical expenses, rehabilitation services and death from an injury or illness sustained while on the job.  You will want to make sure your subcontractors carry at least the minimum required by the state.  Your insurance agent should be able to help you with this.

As an owner-builder, you want to be certain you aren’t taking any unnecessary risks, so take the time to make sure you have proper insurance coverage.  I have seen issues come up years after an alleged accident took place on a job site and some of these involved tens of thousands of dollars.  Keep in mind, some of the types of insurance we talked about here may not be needed for your home addition as you already have insurance on your existing home through your homeowner’s insurance policy.  Be sure to check with your homeowner’s insurance agent to see what will be covered and what types of coverage you will need to add.  For more information on how to protect yourself as an owner-builder, check out our video titled  Build Your Own House:  The Attorney.

No tags