What is Builder’s Risk Insurance?

Builder’s Risk Insurance is for properties that are under the course of construction. This type of coverage is essential in helping to protect construction projects, however it is complex and is often misunderstood. Having a properly structured Builder’s Risk policy in place is crucial to having a successful risk management program.

Builder’s Risk policies help to protect construction projects from damage due to: fire, lightning, hail, explosions, theft, and vandalism as well as “acts of God” such as hurricanes and tornadoes.

Any person or company with a financial interest in a construction project needs builder’s risk insurance. If you are a property owner, general contractor, subcontractor, lender, architect… then you need Builder’s Risk Insurance on your construction projects.

A basic Builder’s Risk insurance policy helps cover buildings and structures under construction, however it also helps protect: materials, supplies, and equipment on site, in transit, and at other locations. Further a Builder’s Risk policy can also provide coverage for lost sales, rental income, additional interest on a loan, and real estate taxes.

Since every construction project is unique, a Builder’s Risk policy should be customized to fit your project’s needs. Common coverage extensions include coverage for: scaffolding, construction forms, temporary structures, debris removal and disposal in the event of a loss as well as pollution cleanup.

Builder’s Risk Insurance, like all insurance, is subject to certain coverage exclusions. Examples of some of the most common coverage exclusions are losses due to: earthquake, flood, and high winds (hurricanes), however some carriers may provide coverage extensions to cover these types of risk for additional premium. Other causes of loss that are typically excluded on a Builder’s Risk policy are wear and tear, acts of terrorism and war, employee theft, rust and corrosion, mechanical breakdowns, and damage due to faulty design, planning, workmanship, or materials.

Builder’s Risk Insurance is priced based on what you need. Generally the cost of a Builder’s Risk policy is dependent on the construction materials and type of project as well as coverage amounts and limits.

Lastly, most insurers write their Builder’s Risk policies on an Inland Marine form rather than on a standard property insurance form, which allows for broader coverage that is tailored to the needs of each construction project. This is why it is important to pick an experienced agent or broker who has access to reputable marine insurance carriers.

Working with an experienced an agent or broker who has experience in writing Builder’s Risk insurance is paramount to ensure you purchase a policy with all the coverages you need. Contact us today to learn more about adding Builder’s Risk insurance to your risk management program.