Builders Risk Liability
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Builder’s Risk Insurance covers buildings and structures under construction, remodeling, or repair. It typically covers the same types of things as regular property insurance, such as damage from theft, fire, vandalism, wind, hail, and other accidental loss or damage to the property.
Coverage usually extends until the building or structure is completed and/or accepted by the owner.
What Builders Risk Insurance Is Not
Builders Risk Insurance is a form of property insurance, but only applies to a building or structure under construction. It doesn’t cover losses that occur before the project is started or after it is completed. In this sense, it is quite different from both Commercial Property Insurance and Homeowners’ Policies.
A Builder’s Risk policy is also different from a Surety Bond, which is used to protect the buyer from financial losses resulting from a contractor’s failure to complete a project.
Who Needs Builders Risk Insurance?
Anyone with a financial interest in a major construction, remodeling, or repair project should consider Builder’s Risk Insurance coverage, including: general contractors, subcontractors, real estate developers, building owners, home builders, colleges and universities, and municipalities, among others.
Some trade associations and financial lending institutions may require Builder’s Risk Insurance, especially on projects worth a million dollars or more.
Things To Think About
Quite often, Builder’s Risk Insurance policies don’t cover earthquakes and floods, but some companies may be able to provide this coverage at an additional cost.
Many policies will also cover loss or damage to construction materials in transit and in storage. Make sure this is covered if this is an important consideration to you.
Contactors’ equipment and tools typically aren’t covered by the building owner’s policy, and will most likely require separate coverage.
Some policies cover “soft costs” associated with other aspects of a construction project like financing, marketing, legal, accounting, additional property taxes, and loss of income resulting from property damage.
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Frequently Asked Questions (FAQs)
Get clear answers to common insurance questions and important details to guide your coverage decisions.
What is Builders Risk Insurance?
Builders Risk Insurance, also known as Course of Construction insurance, provides coverage for buildings and structures that are under construction. It protects against various perils, including fire, theft, vandalism, and certain weather-related events. This insurance is designed specifically for construction projects and typically covers the property until it is completed.
Who needs Builders Risk Insurance?
This insurance is essential for general contractors, builders, real estate developers, and property owners involved in construction projects. It helps safeguard their financial investments from unexpected damage during the construction process.
What does Builders Risk Insurance cover?
Builders Risk Insurance covers damage to the structure under construction, building materials, and equipment used on-site. Common covered perils include fire, lightning, windstorms, hail, theft, and vandalism. The policy may also cover costs associated with debris removal and repairing defective workmanship.
What is not covered by Builders Risk Insurance?
This insurance typically does not cover land, existing structures, employee tools, or equipment not related to the construction project. Additionally, exclusions often include damage from earthquakes, floods, acts of war, government actions, and employee dishonesty. Separate coverage might be needed for these exclusions.
How much does Builders Risk Insurance cost?
The cost varies based on factors such as the project’s value, construction type, and location. Typically, the premium can range from 1% to 5% of the total project cost. Higher-value projects or those in high-risk areas may have higher premiums.
Can I adjust my Builders Risk policy during the project?
Yes, if the project scope or value increases, you can adjust your policy to increase coverage. It is crucial to ensure that the insurance reflects the full replacement value of the project to avoid underinsurance issues.
How do I choose the right Builders Risk Insurance?
When selecting a Builders Risk policy, review the types of perils covered, limits of liability, and any exclusions that might affect your specific project. Consulting with an experienced insurance agent can help tailor the policy to meet your project needs and ensure adequate protection.
