Blog Understanding Builder's Risk Insurance

Understanding Builder's Risk Insurance

Written by Jared Thames—Sales Representative

May 13, 2019 · Personal Lines, Commercial Lines

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When to Have a Builder's Risk Policy

At Hennessey, Thames & Leavitt we understand the importance of a Builder’s Risk Policy.

Builder’s Risk Insurance, also known as Course of Construction, is a unique kind of property insurance. It is a form of insurance, which covers a building where the building is currently being constructed. It can cover just the structure, or also the materials on site waiting to be installed or transported to the job site and is a type of insurance that most owners will ask their contractor to carry.

The builder's risk insurance policy will pay for damages up to the coverage limit. The limit must accurately reflect the total completed value of the structure (all materials and labor costs, excluding land value). The construction budget is the best source for determining the appropriate limit of insurance. Builder’s Risk insurance policies can often be written in terms of three months, six months, or 12 months. If the project is not completed by the end of the initial policy term, it can often be extended, but usually only one time.

The builder's risk policy will provide coverage for damage done to the insured structure from a wide variety of events. Damage from the following events will be covered by most policies: Fire, Wind (may be limited in coastal areas), Theft, Lightning, Hail, Explosion, Vandalism, and Vehicles/Aircraft.

You should read your builder's risk insurance policy to be familiar with its limitations and exclusions. Limited coverage is provided for collapse among other situations.

How Much Does a Policy Cost?

This policy will be in the range of one to four percent of the construction cost, but it will depend on the type of coverage and exclusions that the policy will have. The importance of having a solid insurance company is that they will expedite your claims and will help you solve any potential claims during the construction process. Some companies can cover the soft costs (Soft costs include architectural, engineering, financing, and legal fees, etc.) of the project, but you will need to ask the insurance company to include it in your coverage but be aware that this might increase the cost of your builder's risk. The builder's risk insurance is part of your project's soft costs, and even though it will cost you some money, it is better to have it than not having it when is needed.

Contact Hennessey, Thames & Leavitt to discuss a Builder’s Risk Policy. We can be reached by phone at 601-636-5560, email: Check us out on Facebook or our website