Posted on May 17, 2014

Builders Risk Insurance

Builders risk insurance

When it comes to the construction industry and the specific types of insurance needed to fully protect both contractors and property owners, builders risk insurance is most important. This type of property insurance offers basic coverage for new construction projects as well as renovations and repairs.


What exactly is Builders Risk Insurance?

Builders risk policies provide all risk coverage for accidents, damage or destruction of buildings or other structures while under construction. Property covered can include an entire building or structures that are in the process of being built. Building materials and construction supplies being used by construction crews on the job are also covered while the policy is in force. The insurance protects from such risks as fire, theft and vandalism - anything not specifically excluded in the policy.


Who buys Builders Risk Coverage?

Many commercial lenders financing new construction projects will require the building owner to buy builders risk coverage prior to project commencement. For developments, the contractor or developer will purchase these policies. For liability purposes, contractors or mortgage holders may want to be added as named insured on the policy to fully protect their interests as well. For remodels, owners may want this type of coverage for special projects such as a new room addition or porch.


What isn't covered by Builders Risk?

These policies only cover buildings or structures during the course of construction. They will not cover any damage or losses prior to the beginning of construction or once the project is complete. They also do not take the place of commercial liability for the contractor working on the structure. In other words, construction of the property must be in progress for the policy to exist. Additional coverage to provide protection for associated construction costs is also available as an option. These add-ons are not covered unless specifically included in the policy and can include interest expense, legal and accounting costs, marketing as well as loss of income for delayed opening. Flooding and earthquakes are not covered but can also be added.


What is needed to obtain a builders risk policy?

Experienced insurance brokers can assist property owners in the selection and levels of coverage needed to put the right policy in place with the right amount of coverage. In order to supply an accurate proposal, insurance companies will need further details about the project such as project cost & description, type of building, number of floors, roofing material, protective equipment such as sprinkler systems, security, fencing, etc. as well as project timeframe.

Overall, builders risk insurance provides added protection for all parties associated with a project while construction is in progress. Once a building is completed, property owners will need to convert to permanent commercial property and liability insurance policy to maintain full protection on the property. The insurance broker can assist in streamlining the process to make the conversion go smoothly.


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