Builder’s risk insurance is a vital component of risk management for contractors. It provides specialized coverage for projects under construction, protecting materials, structures, and equipment from unforeseen events. For contractors, understanding the ins and outs of this insurance is key to safeguarding your investments and ensuring project continuity.

What is Builder’s Risk Insurance?

Builder’s risk insurance, sometimes called course of construction insurance, is designed to cover property and materials during a construction or renovation project. It typically protects against risks like fire, theft, vandalism, or weather-related damages. This policy can be customized based on the project’s specifics, ensuring tailored protection for contractors.

What Does It Cover?

Builder’s risk insurance generally covers:

  • Structures Under Construction: Includes the building being constructed or renovated.
  • Onsite Materials and Equipment: Protects materials stored at the job site and equipment used in the construction process.
  • Temporary Structures: Coverage can extend to scaffolding, forms, and other temporary installations.
  • Debris Removal: Provides funds for cleanup after a covered loss.
  • Soft Costs: May cover additional expenses such as legal fees, architect services, or loan interest incurred due to delays caused by a covered event.

Exclusions to Be Aware Of

While builder’s risk insurance offers extensive coverage, it typically excludes:

  • Employee theft
  • Normal wear and tear
  • Acts of war
  • Mechanical breakdowns
  • Contractor errors or poor workmanship

Contractors should consider supplementary policies like general liability or professional liability to address these gaps.

Why Contractors Need Builder’s Risk Insurance

Construction projects face unique risks, from weather damage to theft of expensive materials. Without builder’s risk insurance, contractors may face significant financial losses, project delays, and legal liabilities. This policy provides a safety net, enabling contractors to focus on completing their projects without constant worry about unexpected setbacks.

Tips for Choosing the Right Policy

  • Evaluate Project Scope: Ensure the policy covers the project’s value, including materials, labor, and equipment.
  • Understand the Policy Duration: Builder’s risk policies typically cover the project from the start date until completion. Extensions may be necessary for delays.
  • Customize for Your Needs: Work with an insurance broker to tailor the policy to your project specifics, such as unique materials or high-risk locations.

Conclusion

Builder’s risk insurance is an indispensable tool for contractors, offering peace of mind and financial protection during construction projects. By understanding its coverage, exclusions, and benefits, contractors can make informed decisions to protect their investments and maintain project momentum.

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