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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 specific 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:

  • Fire
  • Lightning
  • Hail
  • Explosions
  • Theft
  • Vandalism
  • Extreme weather

You can also include additional coverages in your builders risk insurance policy. Examples of these additional coverages are:

  • Materials
  • Supplies
  • On-site equipment
  • Scaffolding
  • 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
  • Subcontractors
  • 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!

Frequently Asked Questions

  • What is farm liability coverage? 

    Farm liability coverage is different from general liability coverage, even though they sound very similar.

    General liability is just that, general. Farm liability can be broken down further into more specific coverages.

    Here are a few types of specific liability policies available for different agricultural industries. 

    • Farmers Market/Roadside Stand
    • Agritourism/Agritainment
    • Equine Operations
    • Farm & Agricultural Pollution
    • Seedmen's Error & Omissions
  • What is farm insurance? 
    Farm insurance is a specialized form of agribusiness insurance that provides you dual coverage by protecting your home and operation. Policies differ, but like agribusiness insurance, the four main areas of coverage include:  Home and contents (detached garages, other personal use buildings)  Farm and ranch personal property (livestock, feed, machinery, equipment)  Farm and ranch structures  Business and personal liability coverage 
  • What kind of insurance do farmers and ranchers need? 

    The exact coverage you need will vary based on your business's operations. However, some types of insurance can benefit almost every agriculture business.

    • General Liability Protects your company from claims of bodily injury, property damage, product damage, and more.
    • Commercial Auto Even if you use a personal vehicle for work, a personal auto insurance policy doesn't cover the car while it's being used for work purposes. 
    • Property  Offers protection for commercial structures, business personal property, and machinery. 
    • Theft and Crime Crime-related losses aren't usually covered by your property insurance and require their own unique coverage. 
    • Workers Compensation If any employees are injured or become ill on the job, this insurance can cover the payment of their medical expenses, lost wages, and rehabilitation costs. 
    • Inland Marine You can protect stored products or equipment in an off-site location, mobile irrigation systems, and products you are transporting with inland marine insurance.  
  • Is there anything agribusiness insurance doesn't cover? 
    As with any standard insurance policy, there are specific exclusions and exceptions. One of the most notable exclusions people often don't know about is fencing. In a basic agribusiness policy, the fencing on your property is excluded. However, if you rely on your fencing to keep your daily operations organized and running smoothly, you can find special riders and policy extensions that add fence coverage.  
  • What is agribusiness insurance? 

    Agribusiness insurance is insurance for any agriculture-associated business. There are a variety of policy types because agribusiness is a large field that includes many diverse industries. Some of these industries include: 

    • Commercial Farms
    • Family Farms and Ranches
    • Vineyards
    • Dairies
    • Orchards
    • Wholesale Nurseries
    • Cotton Growers
    • Pumpkin Patches
    • Stables 

    Your agribusiness policy will be completely unique to you, based on what your company produces and what your needs and risks are. 

  • What does agribusiness insurance cover? 

    Agribusiness insurance covers a broad spectrum of risks   as long as it relates to your agriculture business. However, you can break down the available coverages into four easier-to-understand categories.

    • Your home and its contents
    • Farm personal property
    • Farm structures 
    • Liability protection