Builders Risk

Builder’s risk insurance, also called Course of Construction insurance, is a specialized type of property insurance that protects buildings while they are being constructed. The specifics of this insurance can vary significantly depending on the project, meaning no two policies are exactly alike.

Generally, a builder’s risk insurance policy covers the following:

• Hard costs, like building materials
• Soft costs, such as building permits
• Damage from hail, fire, lightning, hurricanes, explosions, vandalism, and theft

Exclusions

Common exclusions from builder’s risk insurance include:

• Earthquakes
• Floods

These exclusions are often due to the environmental nature of the risks, but extensions can be purchased for areas susceptible to these hazards. Other typical exclusions include:

• Corrosion
• Acts of terrorism and war
• General wear and tear
• Damage from faulty design
• Mechanical breakdowns due to poor workmanship, materials, design, or planning

What Does Builders Risk Include?

Builder’s risk insurance covers structures that are under construction, as well as the equipment, materials, and supplies used in the project. If construction is delayed, resulting losses such as property taxes, loan interest, loss of rental income, and other expenses can accumulate. Builder’s risk insurance helps mitigate these financial risks, reducing the impact of delays.

Most policies also include extensions for items like construction forms, debris removal, scaffolding, and temporary structures. Green initiatives to reduce the environmental impact of construction sites are often covered as well.

Benefits of Builder’s Risk Insurance

Construction projects are inherently unpredictable, and having builder’s risk insurance protects your financial investment. Whether you are a property owner, contractor, subcontractor, or investor, this insurance is essential to safeguard against potential losses.

Tips for Choosing Builder’s Risk Insurance

1. Find an Experienced Broker: Look for a broker with significant experience, particularly in the construction industry, to help tailor your coverage to your specific needs and secure the best deal.
2. Consider All Risks Before Choosing Coverage: Assess the unique risks associated with your project, including those related to the transportation and temporary storage of materials. Decide whether a tailored plan with specific coverage or a more generalized plan for all properties is best for you.
3. Understand Coverage Start and End Dates: Typically, coverage begins on the date the contract is signed, but there may be stipulations for a later start date. Know when your coverage starts and ends to avoid gaps in protection. Since builder’s risk insurance is temporary, plan to secure permanent coverage before your policy expires and before the construction project is completed.
4. Read Your Policy Thoroughly: It’s crucial to read your contract carefully before signing. Work with a reputable insurance professional to review the policy in detail and ensure it covers the necessary risks while understanding the exclusions.