Builder’s Risk
Insurance
Builder’s Risk Insurance Coverage: Comprehensive Coverage for Your Construction Projects
Builder’s Risk Insurance, also known as Course of Construction Insurance, is a specialized type of property insurance that covers the property during construction, including the building itself and materials on-site, in transit, or temporarily stored at other locations. The property owner or contractor typically purchases this type of insurance. It is valid for the construction project’s duration, often extending until the project is completed and ready for occupancy.
Whole life insurance offers a unique combination of a death benefit that lasts a lifetime and a cash value component that grows tax-deferred. This makes it a versatile financial tool, serving both as a safeguard for your family’s future and as a source of funds for life’s unexpected events.
Unlike term life insurance, whole life policies provide lifetime coverage and a cash value component that grows over time. This cash value can be accessed for emergencies, large expenses, or even as part of your retirement strategy, giving you flexibility and security.
Considerations When Choosing Builder’s Risk Insurance
What is the scope and size of your construction project?
Where is your construction site located, and are there any geographic risks?
What type of materials are being used in the construction process?
How long will the construction project take to complete?
What safety measures are in place at the construction site?
PREMIUM BASIS
Total Completed Value of the Project
Level of Coverage
Specific Project Risks
Project Duration
Payment frequency and duration
Materials Used
Construction Techniques
Experience of the Builder
Key Features of Builder’s Risk Insurance Coverage
- Property Damage Coverage
- Materials Coverage
- Equipment Breakdown Coverage
- Builder’s Liability Coverage
- Loss of Income or Delay Coverage
Why Builder’s Risk Insurance Coverage
Builder’s Risk Insurance is essential for protecting construction projects from unexpected events like fire, theft, vandalism, or weather-related damage. Whether you’re building a new structure or renovating an existing one, this coverage safeguards materials, equipment, and the building under construction. With Builder’s Risk Insurance, you can avoid costly setbacks and ensure your project stays on track, offering peace of mind to contractors, property owners, and investors throughout the construction process.
Coverage Provided by Builder’s Risk Insurance
Property Damage
Builder’s Risk Insurance covers damage to the insured property caused by specified perils such as fire, lightning, windstorm, hail, explosion, vandalism, and theft.
It protects not only the building under construction but also materials and supplies stored on-site or temporarily stored off-site.
Business Income and Extra Expenses
Builder’s Risk Insurance can provide coverage for loss of income and additional expenses incurred due to delays caused by covered perils. This helps contractors and developers mitigate financial losses resulting from project interruptions.
Theft and Vandalism
Protection against theft of materials or equipment and losses due to vandalism.
Soft Costs
This includes additional expenses that may arise due to a covered loss, such as architect fees, engineering fees, legal fees, and other soft costs necessary to reconstruct or repair damaged property.
Weather-Related Events
Coverage for damages due to weather events like windstorms, hail, and lightning, depending on the policy terms.
Debris Removal
Coverage extends to the cost of removing debris resulting from a covered loss, ensuring the construction site is cleared efficiently for reconstruction.
Equipment and Machinery
Builder’s home insurance can cover construction equipment and machinery, including tools and temporary structures used on-site.
Materials in Transit
Damage to building materials while being transported to the construction site can be covered.
Loss of Rents
For income-generating properties under construction, some policies may provide coverage for lost rental income due to a covered cause of loss.
Exclusions and Limitations
Earth Movement
Typically excludes coverage for damage caused by earthquakes, landslides, and sinkholes.
Flood and Water Damage
Often excluded, although some policies may offer limited coverage for water damage from burst pipes or rain.
Mechanical Breakdown
Failures of equipment due to wear and tear are typically not covered.
War and Terrorism
Damage caused by acts of war or terrorism is generally excluded from coverage.
Intentional Damage
Damage caused intentionally by the insured party or acts of negligence may not be covered.
Design Defects
Builder’s Risk Insurance does not cover costs associated with design flaws or defects in workmanship.
Builder’s Risk Insurance
Frequently Asked Questions (FAQs)
Who typically purchases Builder’s Risk Insurance?
Builder’s Risk Insurance is usually purchased by property owners, contractors, or developers who have a financial interest in a construction project. It covers the structure, materials, and equipment involved in the construction or renovation process.
What does Builder’s Risk Insurance cover?
Property Damage: Loss or damage to the building or structure under construction due to covered perils.
Materials and Supplies: Coverage extends to materials and supplies stored on-site or in transit to the construction site.
Equipment: Protection for construction equipment and machinery used during the project.
Temporary Structures: Coverage may include temporary structures like scaffolding and construction trailers.
Does Builder’s Risk Insurance cover natural disasters?
Yes, Builder’s Risk Insurance typically covers damage caused by natural disasters such as fire, windstorms, lightning, hail, and sometimes earthquakes or floods, depending on the policy.
Is liability coverage included in Builder’s Risk Insurance?
No, Builder’s Risk Insurance is primarily property insurance and does not include liability coverage for injuries or accidents that occur on the construction site. Separate liability insurance is typically required to cover these risks.
When does coverage under Builder’s Risk Insurance begin and end?
Coverage usually begins when construction starts and ends either when the project is completed, occupied, or accepted by the owner or when the policy term expires, whichever comes first.
Can subcontractors be covered under Builder’s Risk Insurance?
Yes, depending on the policy, subcontractors and their tools/equipment may be covered under Builder’s Risk Insurance, especially if they are named or added as additional insured parties.
Do I need Builder’s Risk Insurance if I already have property insurance?
Yes, Builders Risk Insurance is necessary because standard property insurance policies typically exclude coverage for properties under construction or renovation. Builder’s Risk Insurance fills this gap by providing specific coverage tailored to construction projects.
What factors should I consider when choosing a builder's risk policy?
Coverage Limits: Carefully assess the value of the project and choose coverage limits that adequately protect your investment.
Named Perils vs. All-Risk Coverage: “Named perils” policies only cover events explicitly listed, while “all-risk” policies offer broader protection but typically come at a higher cost.
Deductibles: A higher deductible translates to a lower premium, but you’ll be responsible for a larger out-of-pocket expense in the event of a claim.
Project Duration: Ensure the policy covers the entire construction period, from groundbreaking to completion.
Is Builder's Risk Insurance mandatory?
Builder’s Risk Insurance is not mandatory by law, but it is highly recommended for all construction projects. Financial institutions often require it as a condition for financing, and it protects all parties involved from financial losses.
How Long Does Builder’s Risk Insurance Last?
Builder’s Risk Insurance is temporary, typically covering the construction period. Policies are usually issued for three, six, or twelve months and can be extended if the project is delayed.
Is Theft by Employees Covered?
Typically, theft by employees is excluded from Builder’s Risk Insurance. However, you can purchase additional coverage, such as employee dishonesty insurance, to protect against this risk.
How do I file a claim under a Builder's Risk Insurance policy?
In the event of a covered loss, promptly notify your insurance company and follow their claim filing procedures. This typically involves submitting a claim form, detailed documentation of the damage, and any relevant receipts or invoices.
Do I Need Builder’s Risk Insurance for Renovations?
Yes, Builder’s Risk Insurance is also beneficial for major renovations or remodeling projects. It provides coverage for the ongoing work, materials, and any additional structures involved in the renovation.
Safeguard Your Business with TIS Today
Our insurance services go beyond the standard core coverage. We provide the flexibility to add supplemental options to create a truly comprehensive solution that is crafted to meet your specific needs.
By choosing TIS Insurance Services, you are gaining a partner who understands the construction industry and is dedicated to protecting your business with solid contractor liability insurance solutions.
