Insurance for builders – here’s how to protect your construction site
For home construction, there are insurance policies that will step in if something goes wrong. If delays and damage occur during construction due to various circumstances, you can quickly incur high costs: You, as the builder, are liable for damages that happen during construction, must reacquire stolen materials and replace destroyed components of the shell of the building itself. You are also responsible for your helpers. In order to absorb the sometimes very high financial burdens that these risks entail, there are various home construction insurances available.
Several builder's insurances are important
In order to protect your building shell during the entire construction phase, it is not sufficient to take out a single insurance policy: Different policies take effect in the event of various damages. In addition, it also plays a role whether you as the builder are the injured party yourself or a third party. The following insurance policies, in combination, provide good coverage until your home is finally ready for occupancy.
Builder's liability pays third-party claims
Damage to the health, property or assets of others that occurs in connection with your construction is paid by builder's liability insurance. Whether a collapsing scaffold damages a parked car or children are injured while playing on the construction site without permission: Insurance will pay for the cost. However, it's important to take this out before construction begins, because you're liable from the moment you break ground.
Construction performance insurance pays for your
Unlike builder's liability, which covers the costs of others, construction performance insurance insures risks that cost you yourself:
- Elemental and storm damage
- Vandalism
- Clumsiness or negligence on the part of the construction workers
Insured are construction services as well as building materials and components. The replacement of stolen, already firmly installed material can be optionally included in the policy with this builder's insurance. Insurance is often limited to 24 months, sometimes 12, but can be easily extended if needed. It is advisable to keep it active throughout the construction period.
Fire shell insurance against fire damage
Elemental damage, which is covered by builder's performance insurance, does not include fire damage. For this a separate house building insurance becomes necessary, namely the fire raw building insurance. The insurance coverage takes effect in case of fires caused by the following events:
- Lightning strike
- Short circuit
- Implosion
- Explosion
- Defective gas pipes
Some insurers also include arson and the impact of aircraft or aircraft parts or cargo in their policies. For others, such damage can be optionally insured at an additional cost.
The builder's helper insurance covers the helpers
If you have friends or relatives help you with the construction work, you must register them with the construction trade association (BG Bau). Here you pay a premium rate per helper, in exchange the helping persons are covered by the statutory accident insurance. Reporting is mandatory – if you fail to do so, you could face a fine.
However, the statutory construction worker's compensation insurance only provides basic coverage. For the builder himself, his close relatives and spouse, it also does not apply. These persons – and, depending on the risk, all other helpers as well – should be specially protected by a private construction helper insurance policy.
This is a very important builder's insurance policy. Especially if the injuries of the helpers are more serious, the costs can quickly become very high: Treatment, rehabilitation, loss of earnings or even compensation for a disability swallow up large sums and can bankrupt the builder without insurance.
Liability insurance for undeveloped land
If you have purchased a building plot and the start of construction is still in the distant future or not yet planned, it is worthwhile to have liability insurance for undeveloped land. This pays for costs arising from damage suffered by someone in connection with the property.
As the owner, you have a duty to ensure that your property does not pose a risk to third parties. This includes, for example, the obligation to grit in winter or to trim trees and bushes. If you fall on black ice in front of your property or a branch falls on a parked car, you would have to pay for the damage yourself if you were uninsured. The liability insurance for undeveloped properties takes over the costs for you.
Builder's risk insurance: Costs for the individual policies
How much the individual house construction insurances cost often depends on the construction sum: In the case of builder's liability, construction performance insurance and fire shell insurance, insurance companies calculate premiums based on the estimated cost of construction. In principle, you can roughly count on one thousandth of the construction sum as a contribution. However, the amount of the premiums also depends on the desired coverage amount and the scope of benefits. In the case of fire insurance, you also have the option of taking out non-contributory insurance if you subsequently convert it into a residential building insurance policy for which a charge is made.
How much construction helper insurance costs depends on the number of helpers and whether you insure them only through BG Bau or also privately. Per helper the legal insurance costs at least 100 Euro, the private one you get depending upon kind of the contract starting from 25 to 40 Euro.
Liability insurance for undeveloped land is quite inexpensive: the amount of the premiums depends on the size of the land, but often you pay less than 30 euros a year.
You often have the option of reducing the cost of home builder's insurance by paying a deductible. Waiving certain benefits that are unimportant to you also reduces costs. However, always make sure that the agreed sum insured is sufficiently high!
Conclusion: House construction insurance protects against bankruptcy
The various builders' insurance policies complement each other: environmental influences, carelessness, accidents, vandalism and theft can be covered. Damages for the builders themselves, but also for third parties are covered. Overall, the cost of major homebuilder insurance policies is comparatively low for the high level of protection they provide for the entire construction period. Thoroughly compare the different insurance policies with each other and choose the ones that fit your build. This leaves the good feeling after completion that no damage on the construction site can jeopardize the project.