What is one advantage of having a builders risk policy as part of a construction contract?

Having a builders risk policy as part of a construction contract is advantageous because it can help to avoid litigation. This type of insurance is specifically designed to protect against losses that occur during the construction of a building, providing coverage for a variety of risks such as fire, theft, and certain types of weather damage.

By establishing a builders risk policy, all parties involved in the construction project—such as the owner, contractors, and subcontractors—have a clear understanding of the insurance coverage available. This clarity can reduce disputes regarding responsibility for damages, as the policy outlines how risks are managed and what losses are covered. Consequently, if an issue arises, there is less likelihood that parties will have to resort to litigation to resolve claims, as the insurance provides a mechanism for addressing losses and damages.

This proactive coverage thus serves to streamline the claims process, allowing parties to focus on project completion rather than legal battles. In this way, the policy effectively promotes smoother project execution and financial protection for all parties involved.