How much you paying for Design/Builder's insurance?

Question

Builders Risk: For the construction phase. I got a quote of $1120/per home per year. If I sell before year end I get a refund on that home(s).

If I want to do designs:$5,000/yr depending on quantity.

Terry Portier · Answer

$400K,WOW Joe! And I bet that’s peanuts to some areas of the country. This serves as a good example of how important it is to know your exclusions, having your entity that is performing the work as the insured, having your insurance relationships with subs intact for subrogation, and having the right kind of insurance in place. I think some DIYers are under the false impression umbrellas or home owners cover all this and/or if they build to code they have insurance against liability laws, I won’t be banking on that anytime soon.

So if I look at the right insurance price compared to a lawsuits it becomes a no brainer.

Joe Bertolino · Answer

There is a lot of risk in designing your own projects which is why architects are worth what you pay imo.   The first and last owner/builder custom spec home project I insured resulted in a $400,000 construction defect claim with 11 months of litigation.  Sometimes it just isn't worth it to DIY.

Terry Portier · Answer

Joe B.

That is what my agent, his guess is it starts around $5K depending on # of designs.

What confuses me is the definition of "arising out of the rendering of or failure to render any professional services by you" . I'm sure there are a lot of folks out there that design repairs to their personal homes and/or flip/rehabs that do not meet city or architect best practices, and some that are designing complete homes and  construction projects not knowing if that design-build were to cause bodily harm they are not covered unless they have E&O.

I would think some states licensing board, by allowing anyone up to a duplex, etc, compounds the problem. I think I am going to adopt a policy of getting anything we do that is in question bought off by a licensed insured architect. There not that expensive, and I basically pay for their insurance. Much better than getting sued and loseing everything. An LLC is not going to cover this either, acting like an architect when your not or failing to hire one.

Joe Bertolino · Answer

E&O for Architects/Engineers is quite expensive.  The quote for $5000 is likely the minimum premium for that class of business with no prior insurance in force.

Terry Portier · Answer

Steve K

Thanks for your comments you seem to know your stuff. 
I double checked the exclusion in my Commercial General Liability policy (General Construction), here is what it says,

Exclusion – Engineers, Architects or Surveyors Professional Liability
“This insurance does not apply to “bodily injury”, “property damage” or ”personal and advertising injury” arising out of the rendering of or failure to render any professional services by you or any engineer, architect, or surveyor who is either employed by you or performing work on your behalf in such capacity.”

Also real property other than work performed is not covered or warranted, etc.

Seems pretty clear to me that I am not covered to design and build, so we have a licensed and insured architect we treat as a contractor having them list us as an insured on their policy and get a certificate from them, and we need a builder’s risk policy. My agent was guessing @ E&O rates he does not issue it, I have not looked into yet maybe I should since you think $5000 is high, we have the software and our states license board allows anyone to design up to a duplex.

Our commercial GL and Workers Comp insurance policies are written against our LLC as the insured, I’ve seen some out here think a Home Owners policy covers them as a commercial business, I just don’t see that happening.

Wish I could find a better policy that covers design, builder’s risk, and general liability. I’m paying a $1000 now for my CGL and looks like another $1100 for builders, or ~$2100 total per year. ..or maybe that’s not too bad?

Terry Portier · Answer

Void

Steve K · Answer

That seems like a pretty reasonable number for builders risk on an annual basis.

$5k for E&O sounds pretty high.  I'm not sure why your GL policy would require you to outsource design to a professional unless they are considering the structural engineer to be the professional they are referring to.  I'd probably clarify the difference between design from an aesthetic standpoint vs structural.

Terry Portier · Answer

Steve K

Our construction cost I set @ 200K, just trying to get an idea of cost to build our first one.

I read my general liability policy for my general construction rehab business excludes designs and if fail to hire a professional, so my agent said I need an “Errors and Omissions” and I got no idea what that means? If I mess up the design I am omitted? :)

Steve K · Answer

Depends on the value of the project you're building, but that number doesn't sound out of line for a full years coverage.

I'm not familiar with insurance specifically for design.  Is that some sort of E&O policy?