Why You Need Builder’s Risk Insurance

Most people don’t think about insurance until they need it. And unfortunately, by that time, it’s often too late. That’s why it’s important to understand the different types of insurance available and make sure you have the right coverage for your business. Builder’s Risk Insurance is an essential type of coverage for contractors and builders. This type of insurance protects your business from any potential losses resulting from a fire, vandalism, or other types of damage to your property. It can also help protect you if someone is injured on your property. Regardless of the size or scope of your project, this insurance can protect you from a variety of risks and hazards. Read on to learn more about Builder’s Risk Insurance and why it’s important for your business.

What is Builder’s Risk Insurance?

Builder’s Risk Insurance, also known as Course of Construction Insurance, is a specialized type of property insurance. It is a unique policy that covers properties and those with a vested interest in those properties during construction or renovation. Parties listed on the policy are insured against damages or losses due to events like fires, storms, lightning, high winds, vandalism, contamination, explosion, and collision. Since Builder’s Risk Insurance is not a standard policy type, it can vary widely, and the policy coverage can be adjusted to fit your needs. 

Who Needs Builder’s Risk Insurance?

Builder’s Risk Insurance is often required in many towns and counties in order to get a building permit. In general, anyone with a financial interest in the construction project should be listed on the policy. The general contractor on the project will purchase the policy in most cases. Here are some important people you may want to include in your policy:

  • The property owners
  • Any architects or engineers who worked on the project
  • Contractors and subcontractors
  • Lenders
  • Development or investment companies
  • Home builders

What does Builder’s Risk Insurance Cover?

Builder’s Risk Insurance is a very flexible policy and protects your project against certain types of property damage. At the base level, most policies cover damages due to vandalism, fire, lightning, hail, high winds, smoke, theft, explosions, and vehicle collisions. Most policies also provide coverage for rental income and real estate taxes. 

Your policy can be easily expanded to get the right coverage for your project. If your property is in an area that is prone to flooding, you can add flood damage protection to your policy. Here are some other common Builder’s Risk Insurance coverage add-ons:

  • Construction materials lost or damaged in transit
  • Document and data protection for blueprints and project plans
  • Protection for temporary structures like scaffolding, fencing, retaining walls, and trailers
  • Debris removal and disposal in the event of damage
  • Pollutant cleanup
  • Sewer backup
  • Some natural disasters

If your policy does not cover everything you need with additional add-ons, you may need to procure an additional insurance policy to get adequate coverage.

Common Exclusions

Even though Builder’s Risk Insurance is very flexible, there are still several exclusions that most policies will not cover. Here is a list of the most common exclusions for this type of policy:

  • Damages caused by war
  • Workers’ Compensation claims
  • Employee accidents
  • Wear and tear
  • Acts of terrorism
  • Employee theft
  • Rust
  • Mechanical breakdowns
  • Damage due to design 
  • Damages due to earthquake
  • Damages due to building in a beach zone
  • Planning
  • Workmanship

How to Pick the Right Builder’s Risk Insurance Policy

The first step to picking the right policy is examining the needs of your construction project. Evaluate the materials that will be used, the type of project, the expertise of those working on the project, the project cost and location, timelines, square footage of the construction site, and project logistics, like where materials will be purchased from, how they will be transported, and how they will be stored. Make sure to look at policies that have coverage limits that are equal to the anticipated cost of the construction project.

After selecting an appropriately sized policy, make sure you read your policy in its entirety. Double-check your policy’s coverages and conditions for exclusions. If you find a coverage gap, contact your insurance agent right away to see if you can add on coverage. When reading your policy, make note of when your coverage begins and ends. Typically, coverage will start when all contracts are signed, but there may be certain provisions that restrict when the policy starts. Coverage likely ends after the building is over, but there may be specific conditions for the end of your coverage, like expiration, when the building becomes occupied, or when it is put to its intended use.

Builder’s Risk Insurance is an important policy for anyone who has a financial interest in a building project. The best way to choose the right policy is by consulting an experienced insurance broker, like Coughlin Insurance. They have expert knowledge and can assess your project’s risks and needs. Reach out today to get started on finding the right policy for you!

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