Builder’s Risk insurance provides temporary property coverage for structures under construction or renovation. In addition to the building, a policy can be designed to cover temporary storage buildings, fencing, scaffolding, on-site and in-transit materials and supplies, equipment, and valuable papers (blueprints, electronic data). Some policies may also cover soft costs, such as additional loan interest, lost sales income, real estate taxes, and rental income.
Policies are typically written for six or 12 months, with extensions available should construction extend beyond the projected completion date.
Builder’s Risk insurance protects against multiple perils, including fire, lightning, hail, explosions, theft, and vandalism. Examples of when a policy steps in to cover a loss include:
- A fire damages a new home build.
- Tools are stolen from the job site.
- Vandals break into a building under construction and damage the work you did.
What Does the Builder’s Risk Market Look Like?
Rising urbanization, infrastructure development, and the demand for residential, commercial, and industrial construction projects continue to create strong demand for Builder’s Risk insurance. Government investments in large-scale infrastructure, such as highways, airports, and renewable energy projects, fuel the demand for Builder’s Risk insurance. In California, for example, the expansion of renewable energy projects, including solar farms and wind turbines, often requires coverage for high-value materials and complex construction processes.
There are challenges in the Builder’s Risk market, too. Fluctuation in the cost of materials, such as lumber, steel, and concrete, has made it more difficult for insurers to assess project values and risk exposures accurately. As material prices rise, so do replacement costs, which could lead to higher claims payouts for insurers, higher premiums, and stricter underwriting guidelines.
The growing frequency and intensity of natural disasters pose significant risks to projects under the course of construction. Hurricanes, wildfires, and floods can cause substantial damage to construction sites, leading to a surge in claims. As climate risks become more severe, insurers seek rate adequacy and re-evaluate their portfolios.
Builder’s Risk Insurance Trends
Several trends are shaping the Builder’s Risk insurance market. With an increased focus on sustainability, insurers are exploring ways to tailor policies that address the risks associated with green construction, such as using alternative materials that may require different risk assessments.
The rise of modular and prefabricated construction methods is transforming how construction projects are covered. These methods, which involve off-site construction and assembly, require specialized Builder’s Risk coverage to consider the transport and installation of pre-built components. Insurers are adapting their policies to cover on-site and off-site risks associated with these innovative construction techniques.
Insurance companies are increasingly leveraging advanced technology to assess and manage risk in real time. Drones, IoT devices, and artificial intelligence (AI) are being used to monitor construction sites for potential hazards, track progress, and assess damage after an incident. This allows for more accurate risk assessments and faster claims processing.
Gaslamp is available to provide you with a Builder’s Risk insurance quote.
*NOTE: The insuring agreement in a policy sets out the covered perils, assumed risks, and nature of coverage that the insurance company provides to its insured in exchange for the premiums paid. Thus, the terms and conditions of the policy will dictate whether coverage exists and the nature of any potential benefits.