Michigan Builders Risk Insurance: The Ultimate Guide & What You Need to Know

Michigan Builders Risk Insurance is an insurance policy aimed at safeguarding structures that are under construction or renovation. The insurance can be procured by either the property owner or the general contractor, and it encompasses all phases of the construction process, from the initial steps to the receipt of a Certificate of Occupancy.

In Michigan, builders' risk policies are overseen by the state’s Department of Insurance and Financial Services. This department delineates rigorous guidelines for the coverage extent and necessary insurance amounts to safeguard contractors and property owners from financial adversity due to unforeseen occurrences during the construction or renovation of a structure.

Understanding Builders' Insurance in Michigan

Builders' Insurance in Michigan functions similarly to that in other states. It's designed to shelter the contractor and property owner from financial losses due to unforeseen incidents during construction or renovations. This coverage generally safeguards against damages from fire, theft, vandalism, windstorm, hail, lightning, and explosions.

This policy is temporary and intended to last for the project duration. It's crucial to remember that builders' insurance does not cover damage caused by substandard workmanship, defective materials, or negligence from the contractor or property owner.

Coverage Scope of Michigan Builders' Risk Insurance

Builders' risk insurance is explicitly designed to protect against hazards that happen during the construction or renovation process. This policy aims to cover physical damage to a structure resulting from:

• Windstorm
• Hail
• Lightning
• Explosions
• Theft
• Vandalism
• Fire or explosion
• Vehicle collision
• Builders' risk insurance can also cover debris removal and the replacement of temporary structures such as scaffolding.

It's essential to note that builders' risk insurance does not cover damage caused by faulty workmanship, defective materials, or negligence by either the contractor or property owner. Moreover, this coverage does not provide liability protection for the contractor or property owners.

The Need for Builder's Risk Insurance in Michigan

If you have a financial stake in a construction project in Michigan, it's always advisable to have a builders' risk insurance in place. This coverage can offer peace of mind and protect you from unexpected financial losses due to accidents or other unpredictable events that may occur during the construction or renovation project.

Here is a list of individuals who should consider being added to your builders' risk insurance policy:

• Property owner
• General contractor
• Subcontractors
• Material suppliers
• Equipment lessor
• Lenders
• Architects
• Besides having sufficient coverage, it's important to understand your responsibilities as the property owner or general contractor. Ensure you scrutinize all contracts and comprehend who bears the responsibility in the event of damage or delays due to an unexpected incident.

Calculating Builder’s Risk Insurance Cost in Michigan

Several factors determine the cost of your builders' risk insurance policy in Michigan. These include:

a) Project type: The nature of the project significantly affects the cost of builders' risk insurance. Projects range from new construction to renovation and remodeling tasks, so it's crucial to consider the specific nature of your project before purchasing a policy.

b) Location: The project location significantly impacts the cost of builders' risk insurance. Areas with a high frequency of natural disasters such as storms, flooding, or tornadoes typically cost more to insure than areas with a lower frequency of such events.

c) Construction type and materials: The construction type and materials used in the project are vital factors that influence the cost of builders' risk insurance. More complex or expensive materials and construction methods will result in higher insurance costs.

d) Expected completion date: The project's anticipated completion date also affects the cost of builders' risk insurance. Shorter projects tend to be cheaper to insure as there's less time for potential damage or issues to occur during the construction.

e) Amount of Coverage: The amount of coverage you need for your project also influences the cost of builders' risk insurance in Michigan. As a rule of thumb, the more coverage you purchase, the higher the cost, as there's more risk to insure.

f) Expertise and experience of contractors: The proficiency and experience of your hired contractors is another factor that will impact the cost of builders' risk insurance. Contractors with a history of successful projects are likely to receive discounts on their insurance policies due to their lower risk profile.

g) Claims history: Your claim history plays a significant role in determining the cost of builders' risk insurance. If you have a history of filing claims, you can expect to pay higher premiums than someone with no claims on their record.

h) Deductible: The deductible you choose for your policy also affects the cost of builders' risk insurance. A higher deductible generally results in a lower premium, as the insurance company won't have to cover as much of the cost in the event of a claim.

Typically, a builder's risk insurance costs between 1-5% of the total construction budget. For instance, if the construction budget is $100,000, a three-year builder's risk policy could cost between $300 to $1,300 per month in premiums.

Does Builders Risk Insurance Cover Liability in Michigan?

No, builder’s risk insurance isn't designed to cover liability. It's a form of property insurance that covers the property under construction, as well as the materials and equipment associated with the project. This insurance doesn't provide protection for any potential legal liabilities resulting from accidents or damage caused by the contractor or anyone else involved in the project. Therefore, it's crucial to purchase an additional liability insurance policy to provide protection in legal disputes or claims.

Liability insurance can help pay for legal costs if someone suffers injury or property damage due to your work, and it can also provide coverage for certain types of malicious acts.

Questions to Ask Your Insurance Company Before Purchasing Builder's Risk in Michigan

Before buying builders' risk insurance in Michigan, you should ask your insurance provider some critical questions to ensure you're getting the best coverage for your needs. Some of these questions include:

• Does the policy cover all construction materials, equipment, and labor?
• Does the policy cover losses due to theft or vandalism?
• Is there a deductible required for this type of insurance?
• Does the policy cover losses due to natural disasters?
• Does the policy cover liability claims?
• At Oakland Insurance, we're dedicated to providing the best options for builders' risk insurance in Michigan. If you have any questions or would like to discuss your project with one of our experienced representatives, please don't hesitate to contact us today.

We eagerly anticipate assisting you in securing the right type of coverage for your project!