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ARI Blog: Article

Restoration Insurance: What is an installation floater?

So what exactly is Builder’s Risk insurance, and where does an installation floater come in?

Well, put…builder’s risk protects a contractor from a loss during a construction project due to weather, fire, accidents, material defects, and poor installation or artistry. Builder’s risk will provide funding to repair, repurchase or reconstruct the covered loss for the benefit of all contractors working on the project.

Builder’s risk covers all parties with an insurable interest in the project, including the owner, general contractor, and subcontractors. It’s essentially rent loss to ensure the policy covers the project’s hard costs, soft costs, and loss of any rent due to a covered cause of failure. A builder’s risk policy is not a standardized insurance policy and may be a manuscript for a specific project. Because the policy is not standardized, it should be reviewed to confirm what property is included and not included, such as new construction or renovations, existing structures, temporary work, tools, material in transit, or storage.

Covered Cause of Loss within a Builder’s Risk Policy

The covered cause of loss of a builder’s risk policy can be limitedThe builder’s risk must include in coverage or very broad. It’s essential that the builder’s risk consists of all parties involved in the construction of a project, third-party be added as a named insured, or add a mutual waiver of subrogation endorsement. This ensures all parties have equal access to the builder’s risk policy to avoid third party litigation to determine fault of a loss. Third-party litigation to determine fault will grind any construction project to a halt. A no-fault policy, such as a builder’s risk, is for the benefit of all parties in a construction project and is the quickest resolution to cover a property loss during construction.

Before the loss, it should be determined who’s responsible for paying the deductible of a builder’s risk loss. Will the owner, general contractor, or subcontractors be accountable, claim's administrator for 100% of the deductible or will the deductible be determined as a percentage of fault? The policyholder will be the administrator of the claim for the benefit of all parties involved in the loss.

The Installation Floater

The installation floater, however, will protect a specific contractor from the loss of the material installed by that contractor. The installation floater provides coverage only for the policyholder. It doesn’t offer a range for any other party on a project site other than the contractor who purchased the installation floater. The installation floater should be reviewed to confirm the property covered, including material in transit and storage.

Most installation floaters are blanket for all work performed and not specific to any one project; however, it is particular to the policy's limits. To avoid co-insurance penalties for projects that exceed the boundaries of the installation floater, the policy should either waive co-insurance penalties or have a 0% co-insurance penalty factor. The installation floater can supplement a deficient builder’s risk policy provided by an owner or general contractor and may even cover the deductible of the builder’sbuilder’s risk.

The coverage considerations of a builder’s risk policy should not be vs. the installation floaterbut should be considered in concert with each other. The builder’s risk and installation floater provides advantages to the contractor; however, if not appropriately reviewed, you can be left with unseen exposures.

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