There are 4 Important Things to Know Before Purchasing an Investor Insurance. Each phase of the construction of a project is exposed to very specific risks, and the investor and contractor must take into account the occurrence of various types of unwanted events and potential damage.
Major damage during the construction or assembly phase leads not only to loss in the form of physical damage to the building or equipment but also to a serious delay in the work, which also causes a loss of profit for the investor.
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4 Important Things to Know Before Purchasing an Investor Insurance
Investor insurance is a guarantee of the financial security of the entire project. Read about four things you need to know before buying investor insurance.
What Is Investor Insurance Designed for?
The insurance is designed to protect all contractual parties involved in the implementation of the project – the investor, the main contractor, and all subcontractors. This insurance covers the entire implementation process, and the subject of insurance is contracted work, material, equipment, devices, existing assets, or additional costs.
The insurance covers the consequences of fire, explosion, natural disasters such as earthquakes, floods, torrents, and high water, storms and lightning strikes, subsidence and landslides, damages caused as a result of errors in the design, negligence or carelessness of workers, burglary and robberies, construction accidents.
The insurance may also extend to civil liability for property damage or injury to third parties, which is not related to the construction process. This means that the insurance will indemnify third parties instead of you and provide you with legal protection in the event of a claim.
A special part of the policy refers to the investor’s loss of profit in the event of a delay in the completion of the work, provided that the delay is the result of damage covered by the insurance.
What Types of Investor Insurance are There?
The list is long, but we will present to you the 3 most common ones. The wrong type of insurance can spell disaster, and that’s why you need to choose wisely, so click here to better understand why. The following are investor insurance types:
- Landlord’s insurance: Tenant insurance, also known as rental property insurance, combines the various insurances that most property investors require. A tenant’s insurance plan, for example, may cover responsibility, potential danger, and business losses. The items belonging to your tenant are not covered by this insurance. In many countries, users can demand a tenant to acquire and pay for their own tenant’s insurance contract.
- Hazard and fire insurance: Basic insurance will usually include protection from dangers and fire. Structure damage from hurricanes, fires, or thievery are examples of hazards. Once reviewing your tenant’s hazard and fire insurance, many investors would prefer to be secured for the substitute price of the asset rather than just the existing capital gain.
- Partnership insurance: Property investors frequently participate in joint projects or property investment collaborations as they grow their enterprises. You may insure your fellow companions with a partnering policy. That way, rather than having to find a new partner you don’t know, you may maintain the firm when a partner passes away by purchasing their interest from their family.
Who Can Get the Policy and Is Professional Liability Included?
Investor insurance is insurance specifically designed for those involved in the construction industry. The policy can be concluded by the main contractor, subcontractors, or project investor, and all participants are insured.
The obligation to take out insurance is clearly defined in the work contract. Most often, one policy insures the entire project, but it is possible to divide the insurance into as many policies as possible, which follow different stages of construction.
The professional liability of engineers and architects is not covered by the insurance of buildings under construction. If the investor requires professional liability insurance, it is necessary to conclude a separate policy.
A special policy is usually related to the entire business of the contractor. However, nowadays, investors are increasingly demanding a professional liability insurance policy, which will be linked only to an individual project.
Insurance Price and What Documents are Required?
Insurance companies have different criteria for assessing risks and calculating premiums depending on the type of construction project. For example, for residential and commercial buildings, premiums range from 0.2% to 0.3% of the value of the work.
The insurance premium depends on the value of the project, the type of work, as well as the duration of the work. Some of the basic information that is required:
- Project description
- Value of works (project)
- Period of performance of works
- Article of the contract on the performance of works, which refers to insurance
- Details of existing assets
- The value of equipment and machinery for the execution of work
We hope that the concept of investor insurance is now clearer to you and that you will make an easier decision on whether you want to buy it or not.