When you’re in the middle of a construction project, there’s a lot that can go wrong. Vandals, theft, unexpected wildfires, or extreme weather are just a few of the things that could damage your project, your materials, or supplies. Builders risk insurance is designed to protect contractors - and their projects - from mishaps and accidents that occur while a project is in the works.
Here is everything you need to know about builders risk insurance and how it protects everyone involved in a project.
Builders risk is another name for course of construction insurance. This is a specialized form of property insurance that covers a building or structure during the course of construction.
Course of construction insurance covers the material and supplies that you need to finish your project. If fire, flood, high winds, or another covered peril damages the materials that you’re keeping onsite, you won’t have to pay out of pocket to replace them.
Builders risk coverage extends to work completed on a project, as well. If vandals strike and ruin the portion of the build that you’ve already finished, you won’t have to pay out of pocket for the trouble they’ve made. Theft coverage is also typically standard on a builders risk policy.
Course of construction can cover demolition, debris removal, and other clean up costs if your project is hit by an earthquake or other natural disaster.
This coverage extends beyond your project buildings and structures to protect temporary structures such as scaffolding and construction forms, as well. Blueprints and site plans are also generally covered with a course of construction policy.
Builders risk insurance offers broad coverage that protects your project from almost everything, short of intentional acts, fraud, or specific inclusions. It’s probably easier to list what’s not covered in this policy than what is.
Most builders risk policies are “all-risk” or “all peril” policies. This means that, unless an incident is specifically excluded from the policy, most are covered.
This policy is intended for residential or commercial buildings that are being constructed or having major remodels done, however, and not small repairs.
Builders risk isn’t designed to protect you from non-accidents, such as faulty workmanship. You may need additional coverage against product completed or faulty workmanship risks, so read your policy carefully.
A builders risk policy is designed to protect the project itself, and that means owners, general contractors, developers, and subcontractors are generally all covered under the policy.
General contractors or owner/ developers typically are responsible for purchasing the policy, and subcontractors are generally included as “named insureds.”
The policy period is typically written for the time it takes to complete your project: three-months, six-months, or twelve-months. The period can be extended if the project needs more time.
You may decide to add coverage for soft costs, an additional coverage that can protect your project not only from the direct financial loss of supplies and property but from less tangible losses as well. Soft costs typically include financial losses resulting from a project delay, such as extended equipment rentals.
There are multiple factors that determine the cost of a builders risk policy. It should come as no surprise that the property itself is one of the biggest cost factors. The project size and square foot, new construction or remodel, and existing structure value can all contribute to pricing. Materials will also impact pricing, as can your project location.
The parties insured can also play a part in calculating costs. If any of the parties listed on the policy has filed bankruptcy in the previous ten years, the price of coverage could go up.
Policy limits are generally determined by the estimated completed value of your project.
Builders risk is a smart policy that can protect your project from almost any unforeseen accident that could occur during the course of construction. This friendly policy covers all parties working on the project and coverage ends when the project is complete. You never know when your project, materials, or supplies could be damaged or lost in the middle of a project; with builders risk you can get right back to work without losing any of your hard-earned profits.