Most everyone with a dab of common sense understands what the word “risk” means. In the construction business, whether you’re remodeling your home yourself or hiring a construction company to do the work, having a builder’s risk insurance policy is very important, because it indemnifies against damages to a property structure under construction or being renovated by the owner or other for-hire parties. All this builders risk insurance policy stuff may sound a bit confusing, so let’s put in simple, easy to understand jargon.
If you have hired a third party contractor to construct or renovate a building and have suffered some type of negligence caused by the contractor, you have recourse thanks to the builders risk insurance policy. However, you, the owner, will still be responsible for most all other loses that occur. Builders risk insurance is really nothing more than a protection blanket to cover losses to the owner of the property, the building contractor involved, and any mortgage lien holder who’s on the title during the construction phase.
And in case you’re concerned as to exactly what the risk insurance policy covers, they are mostly targeted toward any losses via theft or accidental damages to the property prior to a final signoff approval by any legal city or county authorities. The risk policy is between the contractor and insurance company; ergo, the contractor is the party responsible for payment.