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Course of Construction

Building construction insurance is a type of property insurance specifically designed to cover property during the course of construction, including renovation and repair that is typically is purchased by either the property owner or contractor. It’s needed because most commercial property policies will exclude or null and void coverage if major renovations or construction to the building is above a certain threshold and not fully/properly disclosed to the incumbent property insurance company.  There are additional risks and responsibilities inherent in this type of work that a typical property policy is not designed or priced to cover.  All parties that have property involved in the project should be named in the building construction insurance policy. This may include the owner, contractor, subcontractors, the financial institution funding the project and, in some cases, the architects and engineers too.

Building Construction Insurance Coverage Considerations

When purchasing construction insurance, one of the issues often overlooked is the policy period.

Commencement of Building Construction Insurance: Building construction insurance policies provide coverage for property in the course of construction, renovation or repair. But at what point does construction renovation or repair begin?

  • Typically, contracts require that building construction insurance be provided for the duration of the contract period.
  • The lender may specify the inception date.
  • Be sure to review the building construction insurance policy provisions to determine whether there are restrictions on when coverage begins

Building Construction Insurance Coverage Expiration: Determining when coverage terminates can be equally problematic. Building construction insurance policies can contain provisions that terminate coverage prior to policy expiration.

The provisions typically state that Building construction insurance will end at the earliest of the following:

  • The policy expires or is cancelled;
  • The property is accepted by the purchaser;
  • Your interest in the property ceases;

Careful planning is the foundation for a smooth construction project, which includes the right building construction insurance.

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