Builder’s Risk Insurance

Builder’s Risk insurance is designed to protect construction sites from loss and damage. Builder’s Risk policies (and the projects they cover) are typically available for ground-up new construction, remodeling (including or excluding the existing structure), and installation. This may be a home, commercial building, factory, wind turbine, or anything else that is being built.

There are several groups eligible to purchase the policy in their name, including:

Homeowners/property owners
Builders
Contractors
House flippers
Development/investment companies
Retail companies
School districts

What Exposure Does Builder’s Risk Cover?

While exact coverages and limitations vary between providers, comprehensive builder’s risk policies are often written on an “all risk other than excluded” basis. They usually offer coverage for fire, theft, vandalism, collapse, water damage, and other similar risks. These policies may also offer additional coverages, including (but not limited to) soft costs, flood, windstorm, earthquake, ordinance and law, and business income and extra expense. Policies may also cover damage to construction material, temporary structures, fencing, scaffolding, signs, and landscaping. The variety of coverage options available makes it imperative to review quotes and policies carefully when purchasing builder’s risk insurance.

Coverage will apply to all materials that will become part of the final project as long as those materials are within a set number of feet of the project (usually 1000′ or 2000′, but when in doubt, always check the policy). Coverage is NOT provided for the contractor’s tools and equipment, although there may be exceptions to this on very large policies. Builder’s Risk should be purchased as soon as the project is started.

Common Sub-Limited Coverages

Transit covers materials being transported that will become part of the project.
Temporary locations covers materials which are temporarily stored away from the job site, but will become part of the project. This might be a yard, warehouse or the contractors yard.
Delay in completion usually includes business interruption (such as loss of rent when the project is delayed for the owner) and soft costs. Sometimes these are shown separately.
CAT coverages refer to natural risks like earthquake, flood, wind/hail, named storms, etc.

Soft Costs

Soft costs coverage will reimburse the insured for other expenses when they suffer a loss due to a covered cause of loss. These out-of-pocket expenses are not associated with labor or building materials but can add up quickly. Included soft costs depend on the policy and carrier, but generally include: