In the renovation and construction lenders’ community, the discussion continues to rage about the differences, best use, and practices on two insurance policy products.
The products are:
- General Liability Insurance
- Builder’s Risk Insurance
The conversation on these two policies is quite surprising, given that they are two completely different products entirely. They are in no way interchangeable, and every lender must know that. This piece will attempt to summarize the major differences between the two insurance policy products and help renovation and construction lenders understand better how they can use them to reduce their risks in construction lending.
Major Differences Between General Liability Insurance and Builder’s Risk Insurance
While all general contractors are largely expected to hold a General Liability Insurance policy, and all construction should have a Builder’s Risk Insurance policy, here are the major differences between the two:
- Aliases: The General Liability Insurance policy is also known and referred to as Commercial General Liability Insurance or Business Liability Insurance. Meanwhile, the Builder’s Risk Insurance policy is also known in some parts as Course Of Construction Insurance.
- Insurance Type: General Liability Insurance is a standardized policy only determined by the state, while the Builder’s Risk Insurance is a standard policy in the borrower’s name. The homeowner policy could be used to replace it.
- Purpose: The General Liability Insurance covers the general contractor from accident-associated liabilities. The Builder’s Risk Insurance policy, on its part, covers the building and materials that go into building it.
Both insurance policies are super important, and they have their benefits. However, they should be used as tools to ensure project completion.
If you want to find more differences between the two lenders’ insurance policies and their benefits, click here.
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