Workers in the construction business wear hard hats and other protective gear to combat the daily hazards that come with the trade. But construction business owners need their own kind of protection when it comes to unfinished projects. Since standard property insurance policies aren’t built to cover construction sites in progress, it’s a good idea to work with a Tennessee independent insurance agent to get set up with the right builder’s risk insurance. Here’s why.

What Is Builder’s Risk Insurance?

Regardless of where a construction project takes place, builder’s risk insurance is basically an agreement between a construction project manager, property owner, or general contractor and the insurance company in which the insurer agrees to cover financial losses relating to the construction project. Coverage aims to replace or recover the value of the construction project as it progresses, and covers things like labor costs and property damage.

Of course, each builder’s risk insurance policy in Tennessee comes with its own list of specifically covered perils in which the insurance company will reimburse for losses. Since regular property insurance policies have deficiencies when it comes to buildings still in progress, builder’s risk insurance is set up to provide coverage for a construction project’s current value, which continually increases as the project inches towards completion.

What Does Builder’s Risk Insurance Cover in Tennessee?

Builder’s risk insurance is set up to protect general contractors or property owners against potential threats to the construction project. This goes for construction sites anywhere in the country, including Tennessee. One of the biggest pros to builder’s risk policies is that they protect against big “oops” factors like the accidental destruction of a construction project if an employee mistakenly smashes the entire building or burns it down, for example.

The more risks involved and the larger the scale of your project, the more coverage you’ll need. That being said, builder’s risk policies come with three common coverage options.

There are three main types of builder’s risk policies available in Tennessee:

• Basic coverage: This type of coverage protects against the most major of potential threats like fire, lightning, wind, explosions, and more.
• Broad coverage: This type of coverage includes all the perils of a basic policy, and also adds protection against things like falling objects, water damage, and more.
• Special coverage: This type of coverage includes all of the above, and also tosses in protection for things like theft and vandalism, the two biggest threats to construction sites and exposed materials. Coverage also includes several other perils, and protects against basically anything not listed under the builder’s risk policy’s set of exclusions.

Builder’s risk insurance policies in Tennessee are non-standard, which means they’re not the same across the board. Depending on the insurance company you choose, your policy may have some slight differences in coverage. Working closely with a Tennessee independent insurance agent is the best way to get set up with a builder’s risk policy that meets your company’s needs.

What Does Builder’s Risk Insurance Not Cover in Tennessee?

Though builder’s risk insurance covers a lot of components for construction projects and their supervisors, unfortunately it can’t cover everything. Exclusions for this type of coverage are quite similar to exclusions in many other forms of standard property insurance.

The following are examples of commonly excluded perils under many builder’s risk insurance policies in Tennessee:

• Employee dishonesty
• General wear and tear of equipment, etc.
• Loss/destruction of most equipment/tools
• Routine maintenance fees
• Earthquake damage
• Nuclear reaction and war
• Power failure (unless it causes damage to computer systems)
• Robbery
• Pollution
• Temperature/humidity changes
• Inexplicably lost inventory
• Flood damage*

*In a state like Tennessee that’s prone to heavy rain and flash flooding, you’ll most likely want to purchase additional flood coverage to tack onto your builder’s risk policy. Your Tennessee independent insurance agent can give you more information about finding the right flood coverage for your projects.

Another category not covered under many builder’s risk policies in Tennessee is what’s known as “soft costs,” or things that cost the general contractor, etc. more money because there was a loss during the project. So, if a project gets prolonged due to an error and the contractor has to extend a line of credit, or if a building owner has to find new tenants if someone breaks a lease, special endorsements to cover soft costs can be added to your policy.

What Are the Benefits of Builder’s Risk Insurance in Tennessee?

Builder’s risk insurance offers benefits beyond just reimbursing property owners or general contractors for physical damage to construction projects. There are a handful of reasons builder’s risk insurance policies are so beneficial in Tennessee, such as:

• They provide coverage for property with changing values: Because normal property insurance isn’t designed to cover buildings with constantly changing values such as buildings still under construction, builder’s risk insurance is important because it allows for reimbursement of a building’s current value. The value of a construction project increases as progress is made, and builder’s risk coverage is designed to factor this in.
• They provide protection to various workers: Builder’s risk insurance policies keep the insurable interests of various people in mind. For example, workers such as electricians often don’t get paid until a job is complete. Beyond just the property owner, various types of construction workers need protection for their work while it’s still in progress.
• They cover gray areas: During a construction project, materials that are used become part of the building in progress and technically no longer belong to the worker. Builder’s risk helps provide protection for replacement costs of these materials during that gray area of transferring ownership, when the project is not yet complete and the final paycheck has not been signed.
• They cover costs if a job has to be redone: If a construction site burns down, not only is that construction work lost, but the entire project will have to be done over again. Builder’s risk insurance provides protection for contractors’ overhead and profit in the event they have to start their job all over again.
• They can be bought for multiple types of projects: Builder’s risk policies can cover many different types of projects in Tennessee, from commercial properties to private houses. Builder’s risk policies may be designed to cover just one building or several. Coverage can also apply to renovations on buildings that are already finished, or be used for a complete remodel.
• They cover many different components of construction: Builder’s risk policies often provide coverage for construction components like scaffolding, fences, expensive signage, lumber, and more. These components can be expensive to replace if stolen, vandalized, or otherwise damaged/destroyed while a project is in progress, so coverage is critical.

Your Tennessee independent insurance agent can help you review your builder’s risk insurance policy to answer any remaining questions about your coverage. They’ll also be able to help you figure out whether you’ve got enough coverage, or if you should purchase more.

How Much Does Builder’s Risk Insurance Cost in Tennessee?

The cost of a policy depends on a number of factors, with the biggest one being the end value of the project in question. For example, coverage for a three-bedroom house might only be $500 to $1,000 per year, while coverage for a new football stadium would be much higher, perhaps even up into the hundred thousands. Policy holders in larger cities like Nashville are also likely to pay a bit more for their premiums than those in smaller towns in Tennessee.

Why Work with a Tennessee Independent Insurance Agent?

In order to get the protection you need and deserve, you’ll want to work with a trusted expert. And who could be better for the job than a local agent who shares your area code? Independent insurance agents act as your own personal insurance shoppers, offering you tons more options than one-policy companies. With just one call, they’ll hook you up with multiple quotes.

Tennessee independent insurance agents are armed with knowledge on what coverage is needed in your area, and they’ll get you set up with just enough of it — not too little, not too much. They’ll handle all the heavy lifting so you can rest assured you’ll be set up with the right coverage at the right price.

They’re not just there at the beginning either. If disaster strikes, your Tennessee agent will be there to help walk you through the claims process and make sure you’re getting the benefits you're entitled to. Now that’s thinking ahead.