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Exploring General Liability Insurance For Owner Builders

December 7, 2008
Okay, so youve taken the plunge and decided to act as your own general contractor during construction of your dream home. Good for you! This move can save you thousands and thousands of dollars as your house is transformed from a plan on a piece of paper to an actual structure you and your family can live and grow in. Unfortunately, this move will bring with it lots of questions and chances are youll delve into areas you are wholly unfamiliar with.

One such area involves the need for insurance to protect you, your property and your mortgage company during every phase of construction. General liability insurance is a term you will hear tossed around quite frequently. But, just what is this and do you need to have it?

A Look At General Liability Insurance

In the strictest sense of the term, general liability insurance for construction is a policy that will protect you from a number of different incidents that can occur on a jobsite. Examples include such things as:

Falling objects



Property damage

Essentially, general liability is designed to protect people, not necessarily property.

Who Needs General Liability Coverage?

General liability coverage is typically required for owner builders prior to the start of construction. Most mortgage lenders will demand proof of this coverage, along with other types of insurance before they will release funds for building.

As the owner builder on the property, you will be responsible for making sure everyone and everything is protected from mishaps that can occur on a construction site. Your general liability coverage will act as a blanket to protect during the actual construction, but you are not the only one who should have such a policy.

It is also imperative that the subcontractors you work with also carry their own general liability insurance. If you had chosen to work with a general contractor, he or she would ask each subcontractor to produce a certificate of insurance prior to allowing them access to the construction site. You should do the same thing. This means as you hire your site clearing crews, your electricians and other subs, you should request to see proper documentation from each. It is often best to do this before signing a contract and especially before making an initial payment.

Buying General Liability Coverage

General liability coverage is typically purchased as a separate policy over and above other types of insurance you might need during a construction project. The other forms of insurance your mortgage company might request include:

Builders risk This coverage would normally be provided by a general contractor. It helps protect your investment (and the banks) as the structure is formed and completed.

Course of construction This insurance provides for some coverage against accidents, but it is meant more directly to cover materials and property from theft, damage and vandalism.

Flood insurance If your property does fall within a flood plain, this type of insurance will be required during construction. It is often advisable to purchase this relatively minor coverage even if it isnt required.

As you purchase your other policies prior to construction, it is sometimes possible to obtain a package deal on the purchase. Course of construction insurance, for example, will sometimes offer a builders risk component and also a liability component.

To make sure youre purchasing the right kind of coverage for your construction project and in the correct amount, check with your lender directly to see what is required. It is also a good idea to work closely with an insurance agent to make sure the proper protections are in place.

Getting The Best Pricing

Making sure you have the total package of insurance policies in place prior to the start of construction can seem like more work than actually building the house! Still, the work will be worth every second if something does happen and the coverage is needed. It should be a top priority, however, to get the best policies without paying a cent more than you need to. In order to pull this off, youll want to:

Take the time to go over the exact requirements with your lender Create a checklist of the coverage types and amounts your lender wants you to have in place. Ask questions and be absolutely certain of the requirements.

Get multiple quotes Dont rely on a single quote for coverage to guide your decisions. Take the time to obtain at least three different quotes on coverage that you need. You might even want to look at the policies all packaged together and broken out to compare prices more effectively.

Look into the carriers backgrounds When your dream homes future is riding on an insurance policy, it doesnt pay to cut corners on quality just for pricing. Make sure the company or companies you plan on dealing with are licensed in your state and that they do have a track record for paying valid claims.

As your dream home becomes reality, peace of mind can be had when the right insurance coverage is in place. General liability is just one type of policy youll need to have on your project. There are ways to save some money on this buy, but dont do it by sacrificing quality.