Understand Builder’s Risk Insurance

Builder’s Risk insurance, also known as Course of Construction insurance, covers property that’s under construction. As a contractor or construction professional, you must understand this important coverage.

What is Builder’s Risk Insurance?

A homeowner, general contractor or project manager can purchase a Builder’s Risk insurance policy during a home building project. The coverage protects the property from hazards and accidents that could occur.

What Does Builder’s Risk Insurance Cover?

The accidents and hazards a Builder’s Risk insurance policy covers include:

• Burglary and theft.
• Property loss during transport to the job site.
• Scaffolding, temporary structures and construction forms on the job site.
• Structure collapse.
• Sewer or drain backup.
• Site plans, blueprints and other valuable papers.
• Fire.
• Lightning.
• Wind, hail or rain storms.
• Explosion.
• Impact by aircraft or vehicles.
• Riot, vandalism and malicious acts.
• Debris removal after a covered accident or hazard.

Most Builder’s Risk insurance policies include several exclusions, so read the policy carefully. Your policy probably does not cover:

• Property others own.
• Accidents.
• Subcontractor actions or materials.
• Professional liability.
• Earthquakes.
• Water damage.
• Weather damage to property in the open.
• Mechanical breakdown.
• Employee theft.
• Contract penalty.
• Voluntary parting.
• War.
• Government action.

What is the Policy Length?

The typical Builder’s Risk insurance policy covers a construction project that lasts from six to 12 months. Coverage ends when the project is finished or the property is occupied.

While the policy may be extended due to construction delays, the insurance company may want proof that you are making progress. Also, only one extension is usually offered.

How Much Does Builder’s Risk Insurance Cost?

Expect to pay between one and four percent of the total construction budget for your Builder’s Risk insurance policy. The type of coverage and materials also factor into the cost. Your insurance agent will work with you to purchase adequate coverage you can afford.

Is Builder’s Risk Insurance a Requirement?

As a contractor, project manager or homeowner, Builder’s Risk insurance gives you peace of mind. However, it’s not usually a requirement. Read your project contract for details.

Purchase Adequate Insurance

As a construction professional, you should purchase the right insurance coverage for your business and projects. Insure the tools and equipment you own in case they’re stolen or vandalized. Also, purchase liability coverage that protects you if you damage the property or cause bodily injury. Be sure the finished project is covered, too, in case something goes wrong with the home you build. Provide copies of your insurance policies to homeowners, too. They need to know that you have the right insurance in case something goes wrong.  

Builder’s Risk insurance protects a new home that’s under construction. Understand this coverage as you protect your assets and construction business.