Builder’s Risk Insurance vs. General Liability: What’s the Difference?

Builder’s Risk Insurance and General Liability– The Comparison

Builder’s Risk Insurance and General Liability Insurance are two most relevant insurance components for a construction project. Only one of these covers negligence while one provides coverage for the entire project. Property owners, contractors, and developers should know the difference in order to be adequately insured. https://integrityinsurances.com.au/construction-insurance/

What Is Builder’s Risk Insurance?

Builder’s Risk Insurance or Course of Construction Insurance is a policy that provides coverage to construction buildings. It protects against damage or loss due to numerous risks that can happen within the building while it is still under construction.

Coverage Includes-

Property Damage: During construction, a building can get damaged due to natural disasters which include but is not limited to fires, storms, and even for theft, vandalism etc.

Materials and Equipment: Materials and equipment used for construction are protected when stored on-site, in transit or at any temporary location.

Soft Costs: There are certain policies which provide coverage for permits and legal expenses as well as costs incurred for provided financing.

Exclusions-

Employee Injuries: Any injuries sustained by construction workers on site are out of coverage.

Third Party Liability: Coverage is not provided when claims are filed by outside parties.

Defective Workmanship: This paragraph specifically mentions that losses arising out of inadequate workmanship or poor design are not covered under this insurance. 

What is General Liability Insurance? 

General Liability Insurance, as the name suggests, provides a wider scope of coverage against claims made by third parties against a contractor or business due to injuries inflicted or property damaged during the course of the business activities.

Coverage Includes: 

Bodily Injury: Covers any injuries of a third party, such as a visitor or a client, that occur on the business premises and also any immediate medical treatment and legal action taken against the business. 

Property Damage: Damage claimed from a business or any legal entity arising out of their construction activities, which has resulted in unintended injury to the legal entity’s property. 

Legal Defense Costs: Covers the contractor’s expense in defending against the lawsuit on his part, which includes attorney fee and settlement compensation.  

Completed Operations Coverage: Enables a business to go on insuring itself against claims made for construction failures or defects after completion of the work. 

Exclusions: 

Damage to the Project Itself: Covers the risk of damage to buildings under construction which insurance risk is borne by a builder. 

Employee Injuries: You cannot claim employee injuries under General Liability insurance as it is covered by Workers Compensation. 

Professional Errors: Mistakes of omission or commission such as design faults, lie within the domain of Professional Indemnity Insurance and are not covered by General Liability Insurance.

The Key Differences in Builder's Risk Insurance and General Liability Insurance

Builder's Risk Insurance

General Liability Insurance

Feature

Incurs losses incurred by damages due to construction

Incurs losses incurred due to damage to third parties property.

Covers Property Damage?

Yes, under construction buildings for a fee

No

Covers Third-Party Injuries?

Not exercising negligence

Yes

Covers Equipment & Materials?

Yes

No

Covers Legal Defense Costs?

No

Yes

Covers Employee Injuries?

No

No (Works compensation may be needed)

For What Purpose Is?!

Builder's Risk Insurance is required to protect the project from being damaged when constructing or Glass ceiling Syndrome stretches its limits. General Liability Insurance allows the construction business to be covered from third parties that may wish to sue them due to negligence.

Most construction firms need both to be fully protected.

Final Thoughts

In conclusion, both policies play important role in managing risks in construction. While Builder's Risk protects the overall project, General Liability covers third party claims. Ensure that you have the proper combination of policies to provide excellent coverage, so that construction contractors and property owners will not be subjected to undue financial burden.