Builder’s risk insurance, also known as course of construction insurance, is a specialized type of property insurance that helps protect buildings under construction. 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:
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:
A basic builder’s risk insurance policy helps cover buildings and structures under construction. It also helps protect:
A builder’s risk insurance policy helps protect your construction projects from certain kinds of property damage. It can also help cover additional soft costs, or expenses not directly related to construction, if property damage causes a delay. This can include:
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:
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:
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:
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 an agent or broker and get a quote.
Follow these guidelines to help you get the right builder’s risk insurance policy:
It’s important to work closely with an agent or broker and insurer that has experience with builder’s risk. Every project has different risks, so you’ll need a policy that addresses your unique needs. Your agent or broker can help you choose the right amount of coverage and get you quotes.
Do an inventory of all your project’s exposures at different phases of the project, including those at the construction site, in transit or at a temporary storage site. You may choose to get broad protection for property of all kinds at all locations or narrow your coverage to specific property and risks. Whatever level you choose, make sure you review your policy so there aren’t any coverage gaps.