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What You Need to Know About Builders Risk Insurance
What is builders risk insurance?
Builders risk insurance, also known as course of construction insurance, is a specialized type of property insurance meant to protect buildings and structures under construction. In this case, construction includes completely new buildings as well as remodels and installation work.
What’s the difference between builders risk insurance and property insurance?
As mentioned before, builders risk insurance is a type of property insurance. Still, there is a notable difference: builders risk insurance is designed to be temporary and only lasts as long as construction does.
What does builders risk insurance cover?
Builders risk insurance covers a variety of risks. It can protect construction projects that have been damaged by:
- Extreme weather
You can also include additional coverages in your builders risk insurance policy. Examples of these additional coverages are:
- On-site equipment
- Construction forms
- Temporary structures
- Pollutant cleanup
Builders risk insurance may also help cover expenses arising from a covered delay, such as:
- Lost sales
- Rental income
- Real estate taxes
What does builders risk not cover?
Builders risk insurance can cover quite a bit. However, as with any insurance policy, specific exclusions are not covered.
- Acts of terrorism and war
- Damage from a faulty design
- Employee theft
- Mechanical breakdowns
- Rust and corrosion
- Wear and tear
- Natural disasters like flooding or earthquakes
It’s vital you know precisely what your policy’s exclusions are. No one likes to be hit with unexpected costs, and finding out it’s not covered afterward adds insult to injury. You can find exclusions in your policy, often after the main coverage section.
How much builders risk insurance do I need?
In all honesty, necessary coverage amounts vary greatly from business to business or project to project. However, there is a good rule of thumb!
When deciding on your insurance limits, set them equal to your final anticipated construction cost. This way, you have minimal gaps in your coverage.
Who pays for builders risk insurance?
It can be a challenge figuring out whose responsibility it is to pay for a builder risk policy because the paying party does vary from policy to policy. It would be nice if it were like a date where the initiator takes on fiscal responsibility, but that’s not the case.
Most often, the property owner or the general contractor overseeing the project pays for the builders risk policy, and it’s standard practice to negotiate this before any contracts are signed.
If you’re concerned about whether you’re covered on the policy, worry not. Coverage is not limited to the paying party. You can have multiple covered parties (insureds) on a policy. Some examples include:
- General contractor
- Developer or property owner
- The build’s money lender can be listed as a mortgagee, which offers them financial protection.
How much does builders risk insurance cost?
Unfortunately, there’s no single estimate for how much builders risk coverage costs. Your premium will vary based on many different factors, such as:
- Your selected coverage amounts
- Policy limits
- How much the project costs
- Where the project is located
- The type of project
- Experience level of all contractors involved
- How long the project will take
- Quality of your building materials
- Size of the project and construction site
How do I calculate builders insurance risk cost?
You won’t be able to perfectly calculate the cost of your builders risk insurance on your own. Insurance carriers use an extensive process when creating a quote or final policy. However, a reasonable cost estimate would be about 1 to 5 percent of your project’s total budget.
As experienced agents in builders risk insurance, we strive to know you and your worries. We spend time listening and learning to better serve you and help you find solutions.
You’ve worked hard to build your business. The next step is to protect it. We’ll assess your risks and help you tailor an insurance policy.
We’d love to chat with you. Contact us today!