Builder’s Risk
Coverage —
Vital Protection for
Construction Projects
Safeguard your construction projects with comprehensive builder’s risk insurance, designed to cover property damage during the building process.
Whether you’re overseeing a residential renovation or a commercial development, this protection shields your investment against unforeseen incidents like fire, theft, or vandalism. Our tailored plans ensure your projects remain secure, allowing you to focus on completion without the stress of potential losses.
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The Importance of Builders Risk Insurance
The construction industry is fraught with numerous risks that can lead to substantial financial losses. Without the right insurance, a single incident can derail a project and result in significant expenses. Builders Risk Insurance is crucial for your construction projects, protecting against:
- Property Damage: Construction sites are susceptible to damage from natural disasters, vandalism, or accidents. Builders Risk Insurance covers the costs of repairing or replacing damaged materials and structures, ensuring your project stays on track.
- Theft and Vandalism:Tools, materials, and equipment are often targets for theft on job sites. This insurance provides coverage for stolen items, safeguarding your investment from losses due to criminal activity.
- Delays in Construction: If a covered event halts progress, Builders Risk Insurance can help cover additional expenses incurred due to delays, ensuring you remain financially stable throughout the process.
Did you know?
Builder’s risk insurance is also known as course of construction insurance.
What Is Builder’s Risk Insurance?
Builder’s risk insurance provides financial coverage for buildings under construction, renovation, or repair. This policy protects against risks that can occur at a job site, ensuring that any damages to the structure or materials are financially managed. For contractors and property owners, this coverage is essential for mitigating financial loss due to events that may disrupt progress.
As a construction professional, maintaining a secure job site is crucial. However, despite the best safety measures, accidents can happen. That’s where builder’s risk insurance steps in, offering necessary coverage for your projects, materials, and equipment. This type of insurance is often required for financing projects and is vital for securing contracts.
Builders Risk Insurance Cost
Unlike other goods and services, insurance policy rates vary due to many factors, and the builder’s risk insurance cost is no different. Insurance companies analyze many qualities of your company to quote how much the insurance will cost your company accurately.
The following are considered when calculating the cost of your policy:
- The age of your company.
- Your company’s reputation.
- Your company’s insurance track record.
- The type of company.
- Where your company is located.
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What Does Builder’s Risk Insurance Cover?
Builder’s risk insurance protects your project from various hazards that can occur during construction. Here’s a breakdown of what this coverage typically includes:
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Property Damage:
Covers physical damage to the structure due to perils like fire or wind.
Example: A fire breaks out at the construction site, damaging the partially built structure.
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Theft:
Protects against the loss of tools, materials, and equipment due to theft or vandalism.
Example: Construction materials are stolen from the job site overnight.
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Vandalism:
Covers damages caused by malicious acts.
Example: Graffiti is sprayed on the walls of the building under construction.
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Materials in Transit:
Provides coverage for materials being transported to the job site.
Example: Supplies damaged during transit due to a vehicle accident.
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Natural Disasters:
Protects against specific natural events like storms or floods.
Example: Heavy rains lead to flooding at the construction site, damaging ongoing work.
Builder’s risk insurance offers essential protection, ensuring that your project can proceed with confidence, knowing you have coverage against common construction risks.
What’s Not Covered By Builder’s Risk Insurance
While builder’s risk insurance offers significant protection, it’s essential to understand its limitations. Here are situations where this policy may not provide coverage:
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Existing Structures:
Coverage does not extend to buildings that are already standing before the project begins.
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Employee Injuries:
Injuries to workers on the job site are covered under Workers’ Compensation Insurance, not builder’s risk insurance.
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Mechanical Breakdown:
Damage caused by equipment failure or mechanical issues is not included.
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Contractor’s Tools:
Tools and equipment owned by contractors may require separate coverage.
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Intentional Damage:
Damages caused by deliberate acts, such as sabotage, are excluded from coverage.
Exclusions in Builder’s Risk Insurance
Although all the parties sharing the common interest of protecting the construction project must be named as insured on the certificate of insurance, certain parties, such as employees, are excluded.
The types of damages that are not insured in the builder’s risk insurance include:
- Water damage: When the Loss is due to the improper fitting of wires, resulting in leakages in the newly developed building.
- Employee theft: When employees working at the construction site are deemed responsible for stealing construction articles.
- Defects from workmanship flaws: When the defect in the already-built portion of the construction project is due to the negligence of the craftsman.
- Intentional damage: When there is a risk of deliberate damage, such as stealing or breaking construction material.
Why Do You Need Builder’s Risk Insurance?
Builder’s risk insurance is crucial for protecting your financial investment during construction. It provides essential coverage against unexpected damages and losses, which can significantly impact project budgets and timelines.
Many lenders require this insurance before providing financing for construction projects, making it vital for securing funding and maintaining project momentum. By investing in builder’s risk coverage, you ensure that your projects are safeguarded, allowing you to focus on successful completion without the burden of unforeseen costs.
Builders Risk Insurance Rates And Coverage
This table displays Typical Cost For Various Projects and Locations
| State | Amount of Coverage | Policy Premium | Policy Term |
|---|
| FL | $3000000 | $6480 | 1 Year |
| NC | $2200000 | $4928 | 1 Year |
| TX | $1700000 | $3124 | 1 Year |
| CA | $1700000 | $2414 | 1 Year |
| CA | $1500000 | $3570 | 1 Year |
| CO | $1450000 | $8686 | 1 Year |
| NJ | $1000000 | $3460 | 1 Year |
| VA | $879000 | $5274 | 1 Year |
| MN | $860000 | $2335 | 6 Months |
| CA | $650000 | $1005 | 6 Months |
| IL | $595000 | $595000 | 6 Months |
| MA | $570000 | $958 | 1 Year |
| MN | $490000 | $1813 | 6 Months |
| NJ | $400000 | $2310 | 1 Year |
| TX | $400000 | $1272 | 1 Year |
| MN | $300000 | $1440 | 1 Year |
| GA | $280000 | $1120 | 1 Year |
| CA | $720000 | $3240 | 1 Year |
| NC | $600000 | $1104 | 1 Year |
| TN | $30000 | $375 | 1 Year |
| RI | $300000 | $1050 | 6 Months |
| AL | $200000 | $600 | 1 Year |
| NY | $225000 | $601 | 6 Months |
| TN | $215000 | $430 | 4 Months |
| IL | $160000 | $653 | 6 Months |
Annual premium above includes unlimited certificates of insurance.
Rating assumes 150,000 gross revenues for Builders Risk/general contracting with 10% subcontractor costs.
Premium are subject to underwriting approval and financing charges may apply.
Who Pays for Builder’s Risk Insurance
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General Contractors
GCs are one of the two parties who pay for builders’ risk policies before the beginning of the construction project. The general contractors are responsible for handling builders’ risk policy and paying for deductibles as and when required.
Although both the building owner and the general contractor are responsible for their share of responsibilities, the risk share of the general contractor is the largest of all parties on the builder’s risk insurance. It handles everything from building budget reports to managing subcontractors to handling payments.
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Subcontractors
Subcontractors may hold little insurable interest, but they must be included as insured in the builder’s risk policy. Suppose the completed construction portion on the construction site is damaged for any reason mentioned above. In that case, the subcontractors—including HVAC professionals, electricians, plumbers, and pipefitters—will be among the first few people to be called upon.
Builders’ risk insurance can cover damage or any financial loss in cases of an accident resulting in physical injury or property damage. It will also include wage compensation, medical fees, and other relevant expenses that the property owner or the contractors will otherwise pay from their pocket.
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Project Owners
Like general contractors, the project owner is also very interested in protecting the construction project from any internal or external dangers. A lack of insurable interest can raise the risks of financial loss as the project owner will have to bear the gross liability.
The project owner partners with the general contractor to pay for business insurance and gets overall coverage to protect the property against loss. If the general contractor has not purchased the policy, the project owner is deemed liable for buying the policy.
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Property Owners
Needless to say, property owners will have a massive share of interest in protecting the property in the event of fire, floods, rainfalls, and hailstorms, to name a few. Sometimes the responsibilities and the role of property owners are the same as project owners, while sometimes not.
Homeowners are the property owners when the project is within a residential area. They are liable to purchase a builder’s risk insurance policy when the contractor or the project owner has not purchased one. The homeowners are responsible for taking the most significant risk and thus need the largest share of the builders’ risk policy.
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Who Needs Builders Risk Insurance?
Builders’ risk coverage includes everyone with something to lose on the construction project, be it a construction company, independent contractor, subcontractor, property owner, or small vendor.
All parties must be named insured on the policy and issued in the insurance certificate.
Ensure that all the parties involved in the construction business or that have invested in the project are covered against bodily injury and commercial property damage during the course of construction.
Below are some of the professions that may need builder’s risk insurance, as well as some examples of what their coverage might include.
| Type of Business | What might be included in their Builder’s Risk Policy | What is not covered |
|---|---|---|
| Builders | Stolen tools, stolen equipment, stolen fixtures from a property in construction, and vandalism. | Loss is not covered as a direct result of criminal activities within the business, nor is normal wear and tear of equipment, mechanical failure, acts of war, or acts of nature (such as earthquakes, landslides, etc.). |
| Contractors | Vandalism, stolen tools, equipment, or fixtures from a property in construction are included. | Loss as a direct result of criminal activities within the business, normal wear and tear of equipment, mechanical failure, acts of war, and acts of nature (such as earthquakes, landslides, etc.) are excluded. |
| Developers | Objects or equipment that was present before starting work with a contractor, stolen fixtures from a property in construction, vandalism. | Any loss that isn’t accidental, loss as a direct result of criminal activities within the business, normal wear and tear of equipment, mechanical failure, acts of war, or acts of nature (such as an earthquake, landslide, etc.). |
| Home or Property Owners | Any household items and equipment (like garages, lawnmowers, etc.) that were not present before starting work with a contractor, damage to property, stolen items, or vandalism. | Any intentional damage or criminal activity on the homeowner’s part, normal wear and tear of equipment, mechanical failure, acts of war, or acts of nature (such as earthquakes, landslides, etc.). |
| Retail Companies | Ensures that the property is covered during construction and covers many of the things that other companies cover. This is especially important if you are renting or leasing a building. | It excludes any intentional or criminal activity on the homeowner’s part, normal wear and tear of equipment, mechanical failure, acts of war, or acts of nature (such as earthquakes, landslides, etc.). |
Here’s What Contractors Think
FAQ: What Isn’t Covered by Builder’s Risk Insurance?
No, this insurance only protects properties under construction or renovation, not buildings that were already completed.
No, injuries sustained by workers must be handled through Workers' Compensation Insurance.
No, damages resulting from equipment malfunctions or breakdowns are not included in builder's risk insurance.
Typically, no. Contractor-owned tools may need separate coverage for protection against theft or damage.
Damages resulting from intentional acts are not covered by builder's risk insurance policies.
No, this insurance does not cover financial losses resulting from construction delays due to damages; it focuses solely on physical damages to the project.
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