Despite your best efforts to protect building materials, any number of things can happen during the course of construction. Fire can destroy lumber and drywall, a severe storm can damage heating or cooling units, and custom-made cabinetry can mysteriously “walk away.” You may already have an insurance policy that offers coverage for business property and general liability. But, different rules apply for materials destined for installation and stored either on or away from the building site. It’s sound practice to check your policy for the existence of an installation floater before you make any assumptions about materials coverage. 

Let’s take a closer look at how installation floaters can help add additional protection to your construction projects. 

What is an installation floater?

An installation floater is a form of insurance coverage that protects the value of building materials that will become a permanent part of a commercial or residential structure. The floater can stand alone or be a limited part of a builder’s risk business policy. The coverage typically begins when you take possession of, and transport, roofing shingles, windows, flooring, etc., and ends when those materials are installed as intended. 

Some of the materials you purchase for a construction job can be run-of-the-mill items, but they can also be unique, high-value components that need to be protected from wind, fire, rain, or water damage, among other disasters. This coverage is derived from an installation floater that helps fill some gaps in a base-level contractor’s insurance package. 

Installation floaters fall under the umbrella of inland marine insurance. This broader category of commercial insurance is designed to cover things like building materials, tools, or equipment, regardless of where these items travel. 

Who needs installation floater insurance?

Every contractor or sub purchases construction materials that eventually become part of the completed standing structure. In that case, an installation floater makes good business sense when you consider that accidents, theft, and natural disasters do occur.

Some of the trades that regularly purchase this coverage are as follows:

  • Plumbers 
  • Electricians 
  • Carpenters 
  • Roofers
  • Masons 
  • Landscapers 
  • Drywall installers 
  • HVAC specialists 
  • Painters 
  • Tile installers 

Subcontractors face risk from a variety of angles, and some of those exposures can be addressed through a GC’s policy. Frequently, the terms of a construction contract require that a sub be named as an additional insured on the contractor’s general liability policy. But, therein lies the rub. 

A subcontractor will benefit only from a partial or total amount of liability coverage selected by the contractor. Physical business assets such as tools and equipment are not protected under the GC’s policy. So, a sub will want to secure property coverage of its own while extending protection to building materials through vehicles like an installation floater. 

Learn moreBuilder’s Risk vs. General Liability for Contractors: What’s the Difference?

What materials does an installation floater cover?

It’s important to differentiate between an installation floater and an equipment floater when designing your business insurance strategy. An installation floater provides coverage for building materials that will be installed on a job while an equipment floater protects the tools and equipment that you own. 

To help clarify these differences, here’s a list of common materials covered by an installation floater:

  • Concrete block
  • Beams 
  • Lumber 
  • Plywood
  • Sheathing 
  • Siding 
  • Brick 
  • Shingles 
  • Flooring 
  • Carpet 
  • Drywall
  • Tile 
  • Paint 
  • Cabinetry 

What’s not covered by an installation floater?

Tools and equipment you transport from job to job are not considered to be “installed” items. You might own or rent some of these items for your business, but it’s important to know that an installation floater does not cover the following: 

  • Hand tools 
  • Power tools 
  • Compressors 
  • Generators 
  • Concrete forms 
  • Ladders 
  • Planking 
  • Scaffolding
  • Excavators
  • Mobile storage units 

How much does an installation floater cost?

Since an installation floater can be added to your contactors policy by endorsement or stand on its own, there will be additional costs associated with this coverage. The amount of those extra premium dollars will be determined by a number of factors. Here’s a quick peek at what variables affect cost:

  • Value: The higher the blanket value you place on materials, the more the premium will be. All else being equal, coverage for $50,000 worth of materials will cost more than $25,000 worth of protection. 
  • Business category: Some subcontracting businesses are more prone to losses than others. An insurance company will charge more premium for businesses that incur more claims for stolen or lost materials than other entities. When you hear the term “actuary,” this refers to the folks who calculate premium rates based on a much more complex analysis of claims and their frequency. 
  • Coverage type: Some installation floaters may offer coverage on a named peril basis. This basis would typically include causes of loss such as fire, water, theft, and vandalism. Other policies give you the more expensive option of all-risk coverage, which covers all perils except those that are specifically named and excluded in the insuring agreement. 

On average, installation floaters cost about 75 cents per $100 of coverage. So, in that scenario, you could expect to pay $375 for $50,000 of coverage. Higher costs would apply to unique materials like exotic wood flooring or high-end lighting fixtures. 

Installation floater vs. builders risk insurance

An installation floater may be secured through a comprehensive builder’s risk policy or purchased as a more customizable standalone solution, and it’s important to note the differences between the two when choosing a policy. An installation floater applies strictly to building materials while a builder’s risk policy includes additional coverages such as general liability and business property protection.

Primarily, you can schedule (and pay more per $100 of coverage for) high-value materials on an individual installation floater policy, whereas a blanket endorsement attached to a builder’s risk policy might exclude unique items. 

You’ll likely pay more in total premium for a builder’s risk policy because it offers a broader range of coverage than an installation floater. However, you may notice a higher rate per $100 of coverage for an installation floater, since it usually targets specific items. 

One step at a time 

A solid insurance strategy for contractors and subcontractors is to assess coverages between each job. Your business is evolving and dynamic. Every project usually has its own distinct requirements and you can keep pace with the changes by continually updating strategies. 

Learn moreConstruction Insurance: 9 Types of Policies Contractors Need to Know

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