Why Get Insurance For Construction Material Cost?
Although insurance works to protect you against an event that might happen
and, in some cases, is likely NOT to happen, there are some insurance products
that no one should go without. If you are building your own home, one of the
most important insurance policy you should get is insurance for construction
material cost.
This type of insurance is technically called an All Risk Insurance or a Builder’s
Risk policy. This insurance is specific only to a certain building project and
covers the building site, and the equipment and construction material at the
site. Under this type of policy, construction materials are also covered while
they are on the way to the site and, in some cases, even when they are still
not on the site (like in a warehouse).
All risk insurance is in addition to, and is not part of, a contactor’s
business insurance and liability policy. Although it is the contractor who takes
on the policy, with the building owner assigned as beneficiary, the premium
for the policy is passed on to the owner.
The reason as to why building owners should get insurance for construction
material costs can be best appreciated in light of the current trends in the
construction industry.
Many contractors are cushioning the slap of lawsuits coming their way and litigation
is costly. Without insurance, both parties, the contractor and the building
owner, would be at the losing end.
But it is not just losses in construction materials that building owners should
protect themselves against. They should also protect themselves from contractors
who do not sign contracts on their bids, contractors who do not follow through
on building projects, and unscrupulous contractors who do not pay suppliers
and sub-contractors.
Protection against these risks does not necessarily come from any form of insurance
policy. In actual industry practice, protection comes in various forms of bonds.
There are bid bonds which pays building owners the difference in bid price
of the lowest bidder and the next lowest bidder (in case the lowest bidder does
sign a contract).
There are also performance bonds to cover a contractor’s performance,
labor and materials. If a contractor does not follow through on a project, the
bonding company provides the money necessary to complete the project.
A bond for labor and materials, on the other hand, works with a performance
bond. It protects a building owner from any litigation that may arise from a
contractor not paying sub-contractors and suppliers. It also protects the property
against liens that might be applied against the property in case of a lawsuit.
Experts in the construction industry advise building owners to protect their
business from any form of property risk. To be sure, there are so many forms
of insurance and bonds that may be confusing and overwhelming.
But this can be simplified if owners asses their requirements thoroughly. And
from there they should be able to find the most apt insurance policies and find
the best insurance deals. They would also be able to decide on what bonds are
best for business.
In sum, to protect an entire building project, and not just construction materials,
building owners should:
- Establish their insurance requirements,
- Know how to get the needed insurance at the best rates,
- Read and evaluate insurance policies, and
- secure bonds for contractors and their subcontractors.
If you want to protect yourself and your business then better get an insurance
construction materials cost before starting any project.
Construction Cost
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