Central Insurance Blog

Choosing the right insurance coverage is a crucial part of any construction project. Installation floaters and Builder’s Risk are coverages that offer distinct advantages depending on your project size, scope, and timeline. 

This article will explore how installation floater vs. Builder’s Risk coverages vary. Ryan Lynch, commercial lines underwriting manager at Central Insurance, will also share insights on deciding which option is right for your project.

Understanding Installation Floater Insurance

An installation floater specifically covers materials or equipment being installed rather than the entire building. Coverage generally ends once materials are installed and the project is completed, although in some cases it will last until the policy expires or is canceled, the project is accepted by the purchaser or abandoned, the insurable interest in the property ends, or the property has been put to intended use.

Installation floaters are a common option for smaller projects like HVAC, electrical systems installation, or minor cosmetic renovations and are commonly purchased by subcontractors or new tenants building out a leased space.

When Does an Installation Floater Provide Protection?

• In Transit
  Installation floaters cover materials and equipment that are installed as part of the construction project while transported from the supplier to the job site, providing peace of mind against theft, accidents, damage, or other covered losses.
  
• In Storage
  Construction materials and equipment to be installed are often stored at a location other than the final job site. An installation floater provides coverage against risks like theft, fire, or vandalism while in storage.
  
• During Installation
  An installation floater also provides coverage during the installation process, protecting against direct, physical damage or loss resulting from common perils—such as theft or vandalism—that might occur while the materials and equipment are being installed or constructed at the job site.
  

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What is Builder’s Risk Insurance?

Builder’s Risk covers larger construction projects, such as new buildings or major renovations, protecting your investment throughout the construction process. Builder’s Risk provides coverage for the construction site, including covered on-site structures and materials scheduled as part of the jobsite. Typically, a property owner or general contractor purchases this type of coverage.

When Does Builder’s Risk Provide Protection?

• Physical Loss and Damage
  Builder’s Risk provides coverage for direct physical loss or damage throughout the construction project for many covered perils that may cause damage or loss. Coverage for common perils may include fire, wind, theft, vandalism, and many others. By covering these types of risks, Builder’s Risk insurance helps ensure the project can continue without significant financial setbacks.
  
• Materials, Supplies, and Equipment
  Similar to an installation floater, Builder’s Risk typically covers materials, supplies, and equipment on-site, in transit, or temporarily stored at off-site locations that will be installed and become part of the building or structure.
  
• Soft Costs and Rental Income
  Builder’s Risk insurance can also cover additional soft costs due to direct physical damage or loss resulting in construction delays. Expenses can include advertising or expediting costs, interest, leases, realty taxes, or other additional fees. This coverage is important for commercial policyholders facing significant financial losses if they fail to complete a project on time.

Installation Floater vs. Builder’s Risk: Which is Right for Me?

Lynch notes that the biggest difference between installation floaters vs. Builder’s Risk is that the latter has an option to cover an existing structure if requested, while an installation floater does not cover the building.

“Builder’s Risk may be better for a building owner or general contractor because they may have a vested interest in protecting the entire building including an existing structure,” Lynch says. “An installation floater is a great solution for a subcontractor hired by a strip mall tenant to alter a rental space by conforming to a specific brand aesthetic or changing flooring. They’ll want coverage for the materials being used to build out the space, but they aren’t typically responsible for insuring the existing (or entire) structure.”

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Key Considerations

When deciding between Installation Floater vs. Builder’s Risk, it’s important to consider the nature and scope of your projects. One key consideration is the duration of the coverage needed. Installation floaters are generally more flexible and you can tailor coverage for specific projects or installations, often for shorter durations. Builder’s Risk policies can cover the entire construction project from groundbreaking to completion, ranging from several months to a few years depending on the policy terms and provisions.

Did You Know: Central is proud to have an AM Best rating of “A” Excellent.

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The Central Difference

Deciding between an installation floater and Builder’s Risk depends on contractual requirements. Some contracts may specifically require one type of coverage over another. Reviewing contractual obligations and consulting with your insurance agent to ensure your coverage meets all the necessary insurance requirements is important.

Central recently enhanced our Builder’s Risk product with a pro-rated premium return on the unused coverage period when completing a project before the policy expiration date. With competitive sublimits and enhanced coverages, this update ensures comprehensive protection at a fair price. 

Find an agent to learn more about whether an Installation Floater vs. Builder’s Risk is right for you.