facebook pixel

Who Is Covered For Theft At A Building Under Construction Site?

A building under construction is a common target for theft. According to the National Insurance Crime Bureau (NICB) and National Equipment Register (NER), The financial cost of equipment theft varies from $300 million to $1 billion yearly. Once you include losses resulting from the theft of lumber, tools, and building supplies, the costs are much higher.

So how do you protect yourself or your business from the financial implications?

Interrogation Sign

Theft within the construction site is often a crime of opportunity, except for heavy equipment, which requires planning. Increasing security measures is a great step. But, it will not cover you from financial loss after a theft. Builder’s Risk Insurance and Inland Marine Insurance are two policies that can protect your finances and help keep your project running.

Get Insured Today

What Is Builder’s Risk Insurance?

Builders’ Risk insurance is property insurance that provides coverage for buildings under construction. One of its key benefits is that your policy provides coverage against theft.

You can increase surveillance and hire a security expert to reduce instances of theft. But despite your effort, materials can still be stolen. Your construction company will be expected to replace those materials to keep projects running, causing an unnecessary financial burden if you don’t have the right insurance. Taking up Builder’s Risk coverage will safeguard your interests.

Builders Risk Insurance Pays for the cost of replacement of stolen materials or equipment

Builder’s Risk provides coverage for renovation or new construction projects and the materials and equipment used. So, after there is theft during construction, who pays? The insurance company will pay for the replacement cost of these stolen materials or equipment. 

There is often confusion on who should take out the policy. In this article, we take a look at five stakeholders whose interests are covered; and different ways to protect against the construction site theft.

Who Is Covered On A Builder’s Risk Policy?

  • The contractors

The construction industry operates on thin margins. Therefore, getting coverage that protects you from losing profit is essential. 

A building under construction is easy to access during the night or on the weekend. It is, therefore, no surprise that you will find missing tools, equipment, and fixtures.

Coverage that protects you from losing profit

Once you make a claim, your insurance company will cover the costs of replacing missing items. That saves you money and allows you to return to work as soon as possible.

  • The developers

As a developer, you make a large investment in the construction project. You, therefore, have a lot to lose if your equipment is stolen. Builder’s Risk insurance helps pay for any losses resulting from criminal activity.

Coverage for any losses resulting from criminal activity

Builder’s Risk coverage includes equipment installed before or during construction. This policy should be taken out, especially if you are setting up in a high-risk location.

  • Home and property owners

Construction or renovation projects in residential areas pose a threat to both homeowners and property owners. Residents get used to seeing strangers. That provides the perfect mask for thieves.

Intruders then come and go as they please, posing a risk to property in show houses and occupied homes.

  • Lenders funding a building under construction

Often, a lender will require insurance coverage before a loan is funded. It helps safeguard their investment in case anything goes wrong. Theft is one such case. The coverage will name the lender as an additional insured in case of a loss.

  • The builders

If you run a roofing or handyman business, you understand how important it is to insure your tools of the trade. It is easy to lose track of your items in a building under construction.

Coverage of Loss of equipment on site and in transit

Builder’s Risk insurance is a blessing for builders. The coverage includes loss of equipment on-site and in transit. Given the cost of specialized equipment, insurance is essential.

Ways Builder’s Risk Protects Construction Site Theft:

1. Coverage for materials in transit.

Construction involves the purchase and transportation of building materials. There are many opportunities for theft during transit, especially over long distances. Smaller construction companies often have to hire trucks to facilitate the transportation, which exposes them to risk – especially if the transporter is not trustworthy.Your company can take measures to improve transit security. If a theft does occur, then all you need to do is file a claim. Building insurance covers financial costs associated with the replacement of stolen materials.

2. Coverage for materials stored in an off-site location

As a contractor, you probably own a storage warehouse for your materials and equipment. That is a great idea. It allows you to control the environment and provide additional security. Unfortunately, these off-site storage areas are also susceptible to break-ins, which is a cause of concern.

Building insurance also covers materials stored away from the construction site. However, they have to be directly associated with your insurance project. Whenever you keep construction equipment in an off-site location, include them as part of your insurable interest.

3. Coverage for materials stored on site

You probably store materials within the construction site. That saves time and facilitates a smoother workflow. Additionally, it reduces the costs of moving materials to or from storage sites.

If your construction site does not have sufficient security or is in a high-risk area, you could lose a chunk of work materials. Moreover, considering your massive workload, you shouldn’t have to worry so much about replacing stolen materials.

Additional Measures

Despite the relief brought about by Builder’s Risk insurance, you should take additional measures to secure your materials from the following causes of construction site theft:

1. Poor Site Security

Many construction sites are left unguarded during the night and on the weekend. They lack proper video surveillance and security. 

2. Key Sharing

It is always advisable to allocate a different key for each set of equipment. Having one key makes it much easier for thieves to access your equipment. It would be best if you also considered limiting access to fewer employees.

3. Inadequate Supervision

One of the best ways to stop employees from stealing tools and equipment is by constantly being around the job site. Your presence may discourage the theft of company resources. If this is not possible, consider implementing video surveillance.

4. Poor Storage Practices

At the end of the day, most employees leave their equipment at their job sites. Create a storage system that requires all employees to hand in equipment before leaving the workplace. In addition, provide adequate storage for all equipment. Creating a secure worksite shed is also a good idea.

Furthermore, making frequent claims increases your insurance premiums. Thus, you can improve job-site security and try to prevent construction site theft by:

  • Increasing surveillance: Adding security cameras or guards. 
  • Hiring security personnel
  • Keeping your job site well lit after hours
  • Scheduling supply deliveries
  • Keeping good records.

What Are The Implications Of Theft?

Builders’ Risk insurance is crucial in offering protection during an ongoing construction project. Having a good insurance partner will save you from:

  • Incurring Replacement Costs: Once the provider covers the replacement cost, you will avoid expenses associated with purchasing or renting equipment.
  • Rent Equipment In The Interim: If you cannot afford to purchase new equipment, you may consider renting it. This option is only great for a short time. Renting expensive, heavy equipment over a long period will definitely stretch your cash flow.
  • Project Delays: Replacement of stolen equipment could take time, especially if you lack the financial resources. Inland Marine insurance will save you time by replacing your equipment after a successful claim of construction theft.
  • Increase in insurance premiums: Insurance is often high for construction sites as they are high-risk areas. A good security system works in your favor as it reduces your risk and, consequently, your premiums. It is crucial to keep in mind if you have several losses, your premiums can easily double or triple. Sometimes, you may not even be able to find coverage at any cost.

Insurance For A Building Under Construction

It’s clear that a building under construction involves several stakeholders. To keep your construction business afloat, you must have a proper insurance policy in place. We are experts in Construction Insurance. Call Contractors Liability on 866-321-4353 and protect your business from loss.

Avatar for John Brown
Written by: John Brown
John has more than 25 years of experience in the insurance industry. He grew from a star insurance producer to owning one of the largest agencies in the country; he's a reference regarding contractor's insurance, commercial insurance, and builders' risk insurance.