What You Need to Know About Starting a Building Project Building Project Blueprint You're growing. That means your facilities are also expanding. If you're involved in a building project or foresee one in the immediate future, you should be aware of the proper procedures to ensure everyone's safety during this transitional period. Let's face it, all construction sites create a liability exposure for the landowner. It's also not uncommon for a building to be damaged during construction. People might be injured, or neighboring buildings could be damaged. According to statistics from the United States Bureau of Labor, more than 1,200 construction workers are killed and more than 400,000 injured annually. Selecting the proper insurance depends on a number of factors including if you are using a general contractor, subcontractors, volunteer labor, or a combination. Regardless of the situation, your organization's general liability and umbrella liability policies should be reviewed with your representative before construction begins to ensure protection.
For most building projects, your organization will need to purchase "Builders' Risk" insurance to cover damage to the building under construction. Builders' risk can be added to an existing multi-peril policy or purchased as stand-alone coverage. In some cases, the general contractor will purchase this coverage for you. Builders' risk is necessary because a typical commercial policy does not cover a new building, or the expansion of an existing one, until construction is completed and the structure is approved for occupancy by the local building inspector. A builders' risk policy covers damages from causes such as fire, lightning, vandalism, collapse, wind, and hail. The covered causes of loss can vary by policy. You can also add coverage for theft of building materials at and away from the construction site as well as while in transit. The construction contract specifies who is responsible for stolen materials. The limit of insurance selected should be equal to the estimated completed value of the new building or expansion. This limit should be higher than the project's estimated cost if you utilized volunteer labor or had materials donated. Also, a damaged building can be far more difficult to repair than it is to build. Those who volunteered their time to build might lack the skill to make repairs or be unwilling to repeat the task. There also could be a coinsurance penalty assessed if the building is damaged and not insured to the proper value. Hiring a General Contractor Using a general contractor doesn't mean your organization is protected from loss throughout the construction project. A competent general contractor will provide the expertise for a building project, but there is no guarantee the contractor will obtain insurance to cover property and liability losses or purchase workers' compensation insurance. Before signing a contract with a general contractor, here are points to consider:
Some organizations elect to appoint a knowledgeable member to serve as the project manager. This individual works on the organization's behalf to hire the various contractors to do the work. This technique eliminates the cost of a general contractor but increases the organization's responsibility and insurance risk and cost. There is a tremendous amount of work that must be done to properly select specialty subcontractors, schedule the work, and coordinate the project. Organizations taking this route should:
If you turn to volunteer labor during the construction project, you must provide skilled leadership. Other tips include:
Theft delays construction A congregation was in the process of building a new fellowship hall adjacent to its worship center. The land had been cleared of trees and leveled, the cement slab poured, and the walls were going up. One morning, the general contractor came to the job site and discovered about 50 trusses for the building had been stolen along with other building supplies. Neither the congregation nor the contractor purchased a builders' risk insurance policy before the project began. The congregation did not have the additional funds to purchase the building materials a second time and was forced to halt the project for more than a year while a new fund-raising campaign took place. Storms fail to halt completion A congregation was only weeks away from moving into its new sanctuary, classrooms, and office facility. The last of the rooms were being painted, and the flooring was nearing completion. Furniture was scheduled to be delivered in the next few days. Disaster struck quickly in the form of a major tornado damaging much of the new facility. Members of the congregation were in disbelief as they toured the site and witnessed what little was left of their new church. Although completion of the project was delayed for more than six months, a builders' risk insurance policy covered the rebuilding of the damaged section of the facility and allowed the project to continue and remain within the tight budget constraints. Go back to previous page |