Construction projects involve significant financial risk, both for the property owner who pays for a contractor's services and a builder, who must pay workers and purchase materials. Builders have multiple insurance options from which to choose, each of which varies from one insurance provider to another. Builders risk insurance and installation floaters are two types of insurance products of which contractors should be aware and ready to choose between, based on the risks and needs of each job.
Builders Risk Defined
Builders risk insurance is a form of insurance that protects a contractor involved in a construction or renovation project. It pays for damage to materials or partially completed work due to accidents, fires, weather damage, material defects and incorrect installation or workmanship. Builders risk insurance protects contractors who purchase it to ensure that the time and money they invest into construction projects aren't lost when the costs of repairing, repurchasing or reconstructing add up and diminish profits.
Using an Installation Floater
Installation floaters are insurance policies that cover specific items that a contractor is planning to install. For example, a roofer may purchase an installation floater to cover the cost of roofing supplies, both during transit and while stored at the work site. Installation floaters only cover moveable property, which means that they don't pay for damage to an existing part of a building that results from improper installation.
The biggest difference between builders risk insurance and installation floaters is the fact that builders risk insurance is much more comprehensive. This makes it useful for contractors who complete new construction or take on major renovation tasks. Installation floaters can cover specific sources of loss, or all risks, but only for the type of materials or equipment named in a policy.
Because of its more narrow coverage, an installation floater is generally less expensive than builders risk insurance. However, it leaves the contractor more vulnerable to losses that aren't covered. An installation floater is most appropriate for a contractor who is performing a specific installation task on an existing building, or a subcontractor who takes on limited risk to perform a specific duty for a contractor as part of a larger project.