Builder's Risk Insurance
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Builder's Risk Insurance

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Builder’s Risk Insurance

Builder’s risk insurance, also known as construction insurance, protects buildings while under construction or during a project with significant re-builds or renovations.

It’s essential insurance that varies considerably depending on the type of construction project, and having a well-structured policy to minimize risk and protect the property is essential.

It’s a crucial part of a project management program so that the site is protected seamlessly during construction until it is built and ready for use.

How Does Builder’s Insurance Protection a Construction Site?

Builder’s risk insurance protects from several issues that can result in damage or risk to your property while it’s being constructed. These include natural storms, such as heavy winds, hail, or similar weather, that may cause damage to the site.

A well-structured policy will protect from explosions, lightning, fire, vandalism, hurricanes, and theft. It’s essential to read all the details of your insurance policy to ensure it adequately covers the commercial or residential property site while it’s under construction. 

builder's risk insurance

What Does the Insurance Policy Cover?

There are many areas that your building risk insurance covers, which includes more than the physical construction site. Many policies provide coverage for additional costs, even if they are not directly related to the project, such as lost sales, delays that incur costs due to damage, real estate taxes, rental income, loan interests, and similar expenses.

Since every construction project is distinct, with unique details, for this reason, you can expect that your policy will be customized to fit the needs of your building site, which requires extensions.

These extensions protect various types of forms on your site and the specific risks they pose, scaffolding and temporary structures, cleaning up any pollutants the site produces, and other related items. 

What Isn’t Included in a Builder’s Risk Insurance Policy?

While many areas of a construction site are protected by insurance, exceptions are not included in the policy. It’s important to review these exclusions so that you can proceed with a build with this information in mind.

In some cases, depending on the type of project, you may have the option of adding on extensions to your insurance plan to include coverage for specific areas, such as floods, earthquakes, and sites that are in a beach or windy zone, where certain weather conditions are more common.

Other exclusions are essential to consider, as they don’t fall under the protection of your insurance policy. These include regular wear and tear, employee theft, an act that’s defined as war or terrorism, planning delays or related issues, mechanical breakdowns, corrosion, rust, engineers, raw materials, and artistry. 

Which Building Sites are Eligible for Builder’s Risk Insurance?

This type of insurance is available for non-combustible, fire-resistant, or masonry construction projects, as well as civil work projects, which include bridges, sewers, dams, water mains, and similar projects of any monetary value.

builder's risk insurance

The Cost of Insurance

Builder’s risk insurance policy prices vary considerably based on the project or site, the nature of the construction, the type of coverage you need, and any extensions you add.

You can inquire about an estimate with an insurance agent to get an idea of the overall cost based on the criteria of your project and what you’ll need to be protected.

Who Needs to Purchase Builder’s Risk Insurance?

If you have an investment in a construction project, it’s essential to make sure your financial interest is covered to ensure you have all the protection you need to avoid unforeseen losses.

Having this insurance is essential, and you’ll want to include the following insured parties on your policy: the lender or lenders, general contractors, subcontractors, architects, and property owners. 

Primary Builder’s Insurance Coverage

If you require basic coverage, this policy will include supplies, materials, and any equipment located on-site, in transit, or other locations related to the construction projects.

When you decide on the type of coverage you need, your first consideration should be the projected cost of the overall project, which directly impacts the insurance rate. It’s important to review all the characteristics of your project, as this will significantly affect how much you can expect to pay for builder’s risk insurance.

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Types of Additional Insurance Coverage Available

Various types of additional coverage can provide protection that’s best for your development. If you’re working with sustainable materials and solar panels, you may consider a green construction coverage endorsement, which can help with this part of the project.

Extra costs are not directly associated with the project. Still, they are part of the construction, including interest, financial, marketing, lease, legal, accounting, and related costs. You may also want to include coverage for losses due to delays in income, bylaws, testing, and miscellaneous expenses.

Builder’s risk insurance summary

When you consider various builder’s risk insurance policies, review each contract’s detail, including all the conditions for what’s covered, the types of coverage, any exclusions, and all the items included.

Discussing these details with your insurance broker or agent is crucial to make sure the policy is customized to fit your property’s needs.

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Offers shown here are from third-party advertisers. We are not an agent, representative, or broker of any advertiser, and we don’t endorse or recommend any particular offer. Information is provided by the advertiser and is shown without any representation or warranty from us as to its accuracy or applicability. Each offer is subject to the advertiser’s review, approval, and terms. We receive compensation from companies whose offers are shown here, and that may impact how and where offers appear (and in what order). We don’t include all products or offers out there, but we hope what you see will give you some great options.

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September 21, 2023
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FAQs about builder’s risk insurance

When does the builder’s risk insurance coverage end?

Builder’s risk insurance is temporary, which means the coverage will end once your project is complete. You’ll find details about which specific conditions determine how long the coverage will last. Your policy will explain when it becomes canceled or expired, often when the building is open for its intended use and becomes occupied.

Do builders’ risk insurance policies cover defective work problems?

Most policies don’t include the cost of correcting a subcontractor's work if it’s poorly done or faulty. If you add an extension or modify a policy similarly, this may include loss prevention, covering all or partial repairs due to faulty work.

What risks are essential when shopping for builder’s risk insurance?

It’s essential to perform an inventory of your construction site and project to ensure all items are included in the coverage you need. For example, if you use or need a temporary storage site for equipment or raw materials, multiple locations, scaffolding, environmental conditions, and other factors, to ensure you don’t miss any gaps.

Where are the two main types of insurance plans?

The central policies are designed for homeowners and workers. Insurance policies for workers cover construction damage, delays, interruptions, and building structure issues, as well as protection of materials, equipment, project interruption costs, and related expenses that involve skilled trade professionals and contractors. Homeowners’ insurance doesn’t cover property while it's under construction, which builder’s risk insurance should cover. It’s important to stay in contact with your insurer to determine when construction is complete, and the criteria are met. This means the builder’s risk insurance expires, and homeowners’ insurance takes effect.

Builder's Risk Insurance
made simple

Minimize risk and protect your property

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