New Construction – Insurance Needs

August 22, 2018

Glass ceiling

One of the benefits of the upturn in the economy is the fact that companies are now able to invest in renovations and upgrades to their offices.  A typical response we’ll hear regarding insurance coverage is , “the contractor provides the insurance!”  Sometimes it’s easier for the building owner/tenant to provide the coverage since they already have coverage in place for the location.


A question we routinely hear is, “are these upgrades covered by my property/liability policy?” The answer varies, and if there is coverage on the property policy it likely provides only a small limit of coverage and in most cases, it isn’t very comprehensive.


For property coverage, the section of the policy you need to review is the supplemental coverages section, and the coverage is typically named “newly acquired” or “constructed property.”  The typical limits for this coverage is $250,000 for a building and $100,000 for contents coverage, and sometimes the changes need to be reported to the carrier for the coverage to apply.


For your general liability policy, you’ll need to review your territorial definition.  Does it provide coverage based on the scheduled locations?  Does the project need to be specifically listed?  What coverages does it provide (a standard policy would provide bodily, personal injury, advertising, and property damage).  Also, a general liability policy won’t provide coverage for any errors and omissions since there are specialized policies that cover these exposures.


As you’ve noticed, these limits don’t provide a whole lot of coverage so you may be wondering how to be sure you’ll have adequate protection for your construction.  First, you’ll need to determine the value of the existing construction as well as the cost of the upgrade.  One complication to this coverage is that in most cases, a builder’s risk will be on an actual cash value as opposed to replacement cost.  What happens if the materials are delayed due to a fire?  Time element coverage is needed to provide protection for this exposure.


This is a very broad overview, and the primary goal is to ensure people are aware of the exposure and realize there are many moving parts. For help putting the pieces together, reach out to your local independent insurance agent and discuss the proper and most economical way to have coverage provided.

J&R Agency content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.