Builders Risk Insurance

The Hard Hat

Construction sites are susceptible to risks such as vandalism, theft, and extreme weather damages. Thus, the building requires protections while it is under construction. Therefore, builders risk insurance protects against loss that occurs due these risks. 

In this article

What is Builders Risk Insurance?

Also known as the course of construction insurance, it is a specialized commercial property insurance. It covers a contractor’s property, material and equipment, i.e. related to a project or building under construction or renovation period. Therefore, insurance is available for these types of construction work:
  • Ground-up new construction
  • Remodeling/ Renovation
  • Installation
Construction sites are areas of high risk, and unspeakable things can happen at any time. For example, a wire can short and cause severe damages to a building on the construction site. Moreover, a small error can lead to severe damages. Therefore, with builders risk insurance you can protect the business owner and property owner from unexpected losses. Also, the coverage can be extended to machinery, materials and supplies, and equipment at the construction site.
builders risk insurance 6

Who Needs This Policy?

This policy is for anyone that has a construction project or business that can benefit from the builders’ risk coverage. Therefore, some examples of them are:
  • General contractors: Construction sites have different like equipment, tools and supplies, and materials. Therefore, contractors and sub-contractors who have taken on construction projects can get this policy.
  • Building or property owner: Owners can purchase this policy if the contractors have not done so.
  • Others: Other groups such as development companies, house flippers, and retail companies may also buy this policy.
Furthermore, some lenders or lending institutions may require the owners or contractors to purchase this policy for protection.

How does Builders Risk Insurance Work?

Builders risk insurance is a short-term policy as it covers the construction or renovation project only. Moreover, the policy usually comes for specific time frames like three, six, or twelve months. However, you can extend the policy if your projects timeline is extended. But needs to be done before the policy expires. The policy ends when one of the following occurs:
  • Occupancy
  • Closing of the sale
  • Abandonment of the project
  • Policy expiry date

Don’t wait until it’s too late! Get your affordable and custom-tailored builders risk insurance policy quote for your business today.

What does a Builders Risk Insurance Policy Cover?

Policy coverage differs between carriers. Thus, the following liabilities have protection under this insurance:

  • Structure/building
  • Materials
  • Supplies and tools

Additional liabilities can be added if you extend your protection. Therefore, the protection can cover equipment, machinery, and unattached structures like trailers and fences.

Coverage that falls under the policy are:

  • Weather damages: This coverage includes protection against fire, hurricane, lighting, tornado, hail and other natural disasters. For example, you will be compensated if one the perils destroys your construction site.
  • Theft and vandalism: The insurance will cover against theft or destruction of your construction site. Moreover, equipment, materials and tools are extremely valuable and thus are risk prone to theft. The Annual Theft Report 2016 by National Insurance Crime Bureau and National Equipment Register, echoed the likelihood of theft. Stating that, the cost of equipment theft per year varies from $300 million to $1 billion.
  • Vehicles/Aircraft damages: The insurance will cover against damages caused by vehicles or aircraft crashes. Suppose a truck crashes into a building on your construction site. Therefore, the policy will cover the cost of materials and labor needed to repair the damages.
builders risk insurance 7

Available Extensions and Endorsements

If you would like a little more protection, consider these options to extend your coverage.
  • Materials and property in transit: Inland marine insurance will protect building materials from damages while being transported.
  • Scaffolding: You can cover scaffolding and temporary structures.
  • Valuable papers coverage: This coverage will ensure important documents like blueprints and site plans are protected.
  • Delay in completion: You can add an extension to cover loss of income due to delays because of physical damages. For example, in 2015, Turner construction project was behind schedule and getting shut down. Therefore, the extension would cover the costs if it was due to damages.
Additionally, the extension will cover extra expenses during a suspension. Moreover, soft costs like administrative, inspection, advertising, promotional, construction loan interest, real estate taxes, engineering, are covered as well.

Standard Exclusions in a Builders Risk Insurance

The insurance doesn’t cover everything on the construction site. Therefore, some exclusions are:
  • Workplace accidents and injuries: It would be best if you had a separate workers’ compensation insurance to cover for accidents.
  • Third-party liability: It would also help to go for general liability insurance to cover third-party liability.
  • Faulty design and planning
  • Employee dishonesty and theft
  • Mechanical and equipment breakdown
  • Acts of war
  • Water damage
  • Earthquake
  • Intentional damage

Don’t wait until it’s too late! Get your affordable and custom-tailored builders risk insurance policy quote for your business today.

Types of Insurance that Include in Builders Risk Policy

How much does Builders Risk Insurance Cost?

Costs will differ based on the project, duration, location and quality of materials being used. Typically, premiums will be between 1% to 4% of the total project cost. Therefore, some of the factors that determine the premiums are:

1. Project location

This differs as some areas may be more prone to extreme weather or to natural disasters. Therefore, high risk areas will increase the cost of insurance.

2. Renovations and remodeling projects

Having to protect an existing structure during renovation will increase your premium costs. For example, CBSNews, stated that the Notre Dame Cathedral was undergoing remodel equaling $6.8 million when the fire broke out. Therefore, more reasons to get insured!

3. Construction materials

The quality of materials you use will also affect cost. Thus, when comparing high-quality construction materials to low-quality, high quality will require more coverage and increase costs.

4. Project duration

The longer the project, the longer duration of risk exposure. Therefore, premium depends on the length of the project.
What’s the difference: builders risk vs commercial property insurance?

Commercial property insurance helps cover an existing structure and its contents. On the other hand, builders risk insurance covers risks during construction and renovations. It is a type of property insurance. 

If you have a financial interest in the construction project, it is a wise choice to get builders risk insurance?

If you have a financial interest in the construction project, it is a wise choice to get builders risk insurance. Typically, stakeholders like property ot building owner and contractors purchase this policy. 

What is an installation floater?

Sometimes an installation may create damage to the structure. Therefore, as a precaution, an installation floater is purchased by subcontractors to cover the risk of installation hazard. 

Don’t wait until it’s too late! Get your affordable and custom-tailored builders risk insurance policy quote for your business today.