Adequately assessing the insurance needs of homebuilders and remodelers requires reviewing three key property coverages: Building, Business Personal Property, and Inland Marine. Building coverage is straightforward, if not self-explanatory: this is insurance for the building you own and/or occupy. Business Personal Property covers tangible property—to include office supplies, furniture, and building materials—provided said property is located at your premises or within 100 feet of your premises. The location stipulation for Business Personal Property presents the need for specialty coverage: Inland Marine.
Invoking the insurance industry’s maritime origins, Inland Marine coverage is broadly defined by the International Risk Management Institute as property insurance for property in transit over land and certain types of moveable property. Within the construction industry, Builders Risk is likely the most well-known Inland Marine coverage (please read our previous article that goes into detail on this coverage area). While not every construction project requires a Builders Risk policy, every construction project does have an Inland Marine exposure. Following are several Inland Marine coverages every homebuilder and remodeler should consider when selecting their insurance coverage.
Installation Floater: This coverage area ensures you—namely remodelers and trade contractors—are able to bring a little Builders Risk coverage to each jobsite. Installation Floaters provide property coverage for building materials and components while:
- At the jobsite, while your materials are particularly exposed to the elements (not to mention theft);
- At temporary storage locations, to include the storage unit not listed on your policy or at the supplier’s yard awaiting shipment; and
- In transit, providing you direct coverage in the event your materials are damaged in the course of delivery.
An Installation Floater fills the coverage gap created by the strict definition of Business Personal Property and can often be added to your Commercial Package or Businessowners Policy.
Scheduled Equipment: This is part of your “certain types of movable property” referenced above. Do you own any excavators, scissor lifts, or any other pieces of heavy equipment? If so, you should consider “scheduling” (insurance term for specifically listing) these items on your insurance policy. One key factor to keep in mind when scheduling equipment is the valuation used by the insurance carrier: Replacement Cost contemplates the cost to replace an item with like kind and quality, whereas Actual Cash Value factors in depreciation.
Leased/Rented Equipment: Fairly self-explanatory, this line item provides coverage the equipment you lease and/or rent. Furnishing a certificate of insurance to the leasing/rental agency showing this coverage is much more cost effective than buying the required insurance from said agency.
Tools: The cost of tools can add up quickly, and Business Personal Property will not respond to claims concerning tools when said tools are not located at your premises. Coverage for tools, including the tools owned by your employees, is included in many insurance companies’ Inland Marine/Installation Floater forms.
In conclusion: the constraints of Business Personal Property, the nature of the construction business, and the vulnerability of construction projects to the elements render Inland Marine a critical insurance coverage area for the homebuilding and remodeling industry. You may be surprised at the relatively low cost of adding Inland Marine coverage to your insurance program – especially when compared to the cost of an uncovered claim. Insurance needs vary greatly from company to company within the construction industry. Selecting the appropriate coverages and limits should be done in coordination with a consultative insurance agent who takes the time to learn the specific needs of your business.
For more information on the insurance industry terms referenced above, please visit the International Risk Management Institute’s Online Glossary.