Builders Risk insurance provides coverage for buildings and structures while under construction, renovation, or remodeling. The policy, written for a specific time frame (3, 6, 9, or 12 months), protects against various risks that can occur during the construction process. It typically covers the following:
- Property Damage to Insured Structure & Materials: This includes damage from fire, lightning, wind, theft, and vandalism.
- Materials in Transit: Coverage may extend to building materials and equipment in transit to the construction site.
- Debris Removal: The cost of removing debris resulting from a covered loss is often included in the policy.
A Builders Risk policy can also cover soft costs related to construction delays from a covered loss, such as architectural and engineering fees, permits, and other project-related expenses.
Once construction or renovation is completed, a Builders Risk policy is no longer needed, and other types of insurance, such as Commercial Property or Homeowners insurance, should step in to insure the property.
The Benefits of a Builders Risk Policy
You should buy a Builders Risk policy for a number of reasons, including:
- Construction projects involve substantial investments in materials, labor, and equipment. The financial impact on your business could be significant if an unforeseen catastrophe causes damage or loss during the construction process. Builders Risk insurance helps you retain financial stability by covering repair or replacement costs, allowing them to recover more rapidly.
- Builders Risk insurance is typically required in your contract agreements with property owners, lenders, or other stakeholders. Compliance with such contractual duties is crucial in obtaining a project, maintaining excellent client relationships, and ensuring the project runs smoothly.
- Construction projects are frequently carried out with a set budget and timetable in mind. Any unanticipated loss or delay might impact your profitability. Builders Risk insurance safeguards against these financial losses and helps keep the project financially viable.
Common Objections in Buying a Builders Risk Policy
The policy will add to the cost of my project.
While there is a cost associated with buying Builders Risk insurance, the potential financial impact of not having coverage in the event of a loss is far greater. You will have protection against significant financial losses to safeguard your business.
I don’t really need the coverage.
Builders Risk insurance specifically addresses risks, such as fire, theft, vandalism, or natural disasters, that could occur during the construction phase. Your General Liability or Property policy will not cover losses for properties under construction or renovation.
My subcontractor or property owner already has coverage.
Builders Risk insurance is typically the responsibility of the party in control of the construction site, which is often the general contractor. Having control over the insurance coverage will help ensure that your interests are adequately protected.
It’s a short-term project, so the risk is minimal.
Even short-term projects are exposed to various risks, and a single unforeseen event can have a substantial impact. Builders Risk insurance provides targeted coverage for the project’s duration, offering protection during this vulnerable construction phase.
My contract with the owner doesn’t require Builders Risk insurance.
Although a contract may not explicitly require Builders Risk insurance, having the coverage can demonstrate your professionalism and responsibility, potentially leading to more favorable terms in future contracts.
*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.