Builder’s risk insurance, also known as course of construction insurance, is a specialized type of property insurance that helps protect a building under new construction or a remodel project. It’s essential in helping protect construction projects, but can be complex and often misunderstood. However, having a properly structured builder’s risk insurance policy can be crucial. In fact, it will serve as the backbone of a successful risk management program.
Builder’s risk insurance helps protect construction projects from property damage due to:
- Fire
- Lightning
- Hail
- Explosions
- Theft
- Vandalism
- Acts of God, like hurricanes
What out-of-pocket expenses could you face on your personal and/or commercial property after a loss? Without the right builders risk coverage, you might spend double in hard and soft costs to complete your new construction or remodeling project.
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| Advertising and promotional expenses Architects, engineers and consultants fees Real estate and property tax assessments Interest on construction loans License and permit fees Insurance premiums Commissions or fees for lease renegotiation Legal and accounting fees | Labor Overhead Profits if included Grading and landscaping Concrete materials like drywall and windows Plumbing and electrical Appliances and fixtures |
Any person or company with a financial interest in the construction project needs builder’s risk insurance. Some common people you may want to include on your policy as insureds include the:
- Property owner
- General contractor
- Subcontractors
- Lender
- Architects
A basic builder’s risk insurance policy helps cover buildings and structures under construction. It also helps protect:
- Materials
- Supplies
- Equipment on site, in transit or at other locations
Because every construction project is unique, each builder’s risk policy is different. You can customize your policy to fit your project’s needs by getting coverage extensions. Common extensions include protection for:
- Scaffolding
- Construction forms
- Temporary structures
- Debris removal and disposal in the event of a loss
- Pollutant cleanup
Be aware that builder’s risk insurance may have coverage exclusions. For example, earthquake, flood, wind or beach zones are usually excluded from coverage, but you may be able to get extensions to help protect projects vulnerable to these kinds of risks. Other builder’s risk insurance coverage exclusions include:
- Wear and tear
- Acts of terrorism and war
- Employee theft
- Rust and corrosion
- Mechanical breakdowns
- Damage due to faulty design
- Planning
- Workmanship and materials
- Engineers
Every builder’s risk insurance policy is different, so costs vary depending on what you need. Your policy may need more coverage or you may need to add extensions to help protect your construction project. Generally, your builder’s risk insurance cost depends on the:
- Construction materials
- Type of project
- Policy details, like coverage amounts and limits
A good rule of thumb is to choose coverage limits that are equal to the anticipated cost of construction. So, if your construction project has a high cost, it could result in a higher insurance rate. The best way to find out your builder’s risk insurance cost is to contact us and get a quote.