The COVID-19 pandemic is creating a financial crisis the likes of which have not been seen in America for generations, possible since the Great Depression.
Many people and businesses are turning to their insurance agencies to make claims, only to find out that very few losses due to the pandemic are actually covered.
Interestingly, of all the business policies available, builders risk insurance has turned out to be one of the only policies that does cover certain losses due to the COVID-19 pandemic.
In some states, interpretation of these policies means that some specific pandemic-related losses encountered can be claimed and reimbursed.
What Does Builder’s Risk Insurance Cover?
Builder’s risk insurance is an insurance policy for the owners and builders of new construction projects.
It protects investors against losses due to physical damage to the unfinished building, damage or loss of supplies and building materials, loss of income or unexpected costs during the project caused by some type of peril, and other types of loss.
In that sense, some states have deemed the current pandemic as a coverable loss for underway projects that have been negatively affected due to shutdowns and other restrictions and suffered financial losses.
Builder’s Risk Insurance and COVID-19
Many risk policies sold by builders risk insurance companies provide coverage for losses due to the COVID-19 pandemic as the majority of these losses seem to stem from forced shutdowns and stay-at-home orders.
Projects have been put on hold as a result, causing project investors financial losses in mostly soft costs, but with a few hard costs, as well.
Losses covered under builders risk insurance include things like extra interest expenses, advertising losses, and additional administrative and legal fees on delayed projects, lost projected rental income and profit, additional property taxes, and other costs due to the delay in getting the project finished.
A few hard costs such as expenses incurred protect stalled projects during shutdowns as required in their insurance policies, increased time and labor costs to resume and complete the project, and similar losses may be claimable.
Force majeure losses may also be covered.
Exclusions May Still Apply
As with all other insurance policies, builders risk insurance agencies do stress that policyholders must still review any exclusions to their policies, as these may still override what might be thought to be a covered loss.
Pandemic, cessation of work due to government order, and abandonment clauses within builders risk contracts may apply, making the losses non-recoverable.
Some of the above coverage may only be available as coverage extensions which, if not purchased, would make those losses void.
Talk To Your Insurance Agency About COVID-19 Builder’s Losses
In conclusion, it’s essential that contractors and investors involved in any delayed building project that is sustaining financial loss due to the COVID-19 pandemic contact their builders risk company to discuss their current risk policy.
Builders risk insurance is one of the few areas where the insured may have a claimable COVID loss, but only if those losses are not encompassed by a documented policy exclusion.