Builder's Risk
Insurance

What is Builder's Risk Insurance?

Builder’s risk insurance, also known in some areas as course of construction, is a unique kind of property insurance. It’s a form of insurance covering a building where the building or insured area is presently being constructed. For example, it can cover the structure or the on-site materials waiting to be installed or transported to the job site. It is a type of insurance that most owners will ask every 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). Therefore, the construction budget is the best source for determining the appropriate insurance limit.

What does Builder's Risk Insurance cover?

Most policies will cover damage from the following events:

A) Fire

B) Wind (may be limited in coastal areas)

C) Theft

D) Lightning

E) Hail

F) Explosion

G) Vandalism

H) Vehicles or aircraft

Why is Builder's Risk Insurance important?

A builder’s risk insurance policy helps protect your construction projects from certain property damage. It can also help cover additional soft costs or expenses not directly related to construction if property damage causes a delay. This can include:

A) Lost sales

B) Rental income

C) Additional interest on loans

D) Real estate taxes

Because every construction project is unique, each builder’s risk policy is different. You can customize your policy to fit your project’s needs by getting coverage extensions.

What's the difference between Builder's Risk Insurance and Contractor's General Liability Insurance?

This is where confusion often arises. For example, a contractor might ask: ‘Why do I need builder’s risk insurance when I have contractor’s general liability insurance?’ On the surface the two coverages may seem similar, but they play very different and equally important roles.

While builder’s risk insurance covers the contractor’s property or equipment during construction, the contractor’s general liability insurance policy covers bodily injury, property damage, and any resulting liability that may arise from possible accidents. In addition, it protects contractors if they’re accused of causing injury or property damage.

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