When it comes to insurance for new construction properties, it is important to understand its unique insurance needs. Neglecting to do so exposes your clients and their business to hundreds of thousands of dollars in potential losses resulting from risks like fire, theft, or other property damage.
How much insurance coverage is sufficient for a property being built?
When it comes to insuring a new construction property, the dwelling coverage amount should be equal to the expected construction cost. This would ensure that if your investor client had a total loss of the property being built, they would receive close to what they have invested into the property. Remember, with new constructions the settlement amount would be settled on invested capital at the time of loss.
Does my investor client need liability insurance for a new construction property?
Yes! In addition to direct property damages, new construction properties face high liability exposure. Liability coverage is always a MUST when it comes to new construction investment properties. There isn’t a right or wrong amount of coverage to carry. Properties that are being built from the ground up face greater liability exposure. They usually require higher limits of $1MM per occurrence and $2MM aggregate. One slip and fall claim could cost your investor client hundreds of thousands of dollars. You may recommend an umbrella policy depending on your client’s appetite for risk and investment property portfolio size. There are risks associated with using their homeowner’s liability policy for new constructions. Investors should always keep their personal lines liability policy separate from their business.
Does the investor client’s premises liability coverage extend to the general contractor or any workers?
No, it does not. Their general contractor should carry their own GC or workers comp policy. Your investor client should verify that they do and ask to be added as an additional insured. As a matter of fact, anyone working on the property should have liability coverage of their own. By verifying that workers have their own GC or workers comp coverage, your investor client can help protect themselves from exposures they face by injured contractors.
Did you know REInsurePro provides this type of coverage? Check out GCGuard by REInsurePro, general liability insurance for artisan and general contractors.
What deductible should my investor client carry on a new construction project?
When working with your investor client to decide on a deductible, take the lowest claim they would file and double it. If they would never file a $1,000 claim, don’t carry a $500 deductible. Remember, the lower their property deductible, the higher their rate. If they choose a higher deductible, the premium savings generated may be more than enough to offset the difference.
How much does new construction insurance cost?
Insurance costs on properties being built vary based on several factors. The most important factors are desired insured amount, deductible and level of coverage. However, keep in mind that the cheapest coverage isn’t always the best coverage, especially for new construction properties. When speaking with your investor client, inform them of what is and isn’t covered on their policy for new construction properties.