What is Builder’s Risk Insurance?

What is Builder’s Risk Insurance?

When it comes to construction projects, whether you’re constructing a new home, a commercial; property, or even undergoing significant renovations; there are numerous risks involved. Materials on the job site may be stolen, structures can be damaged by weather events, and countless other unforeseen events may occur which could delay or damage the project itself. This is where builder’s risk insurance can come into play. In this post, we’ll go over what builder’s risk insurance is, what builder’s risk insurance covers, and why builder’s risk insurance is a crucial part of managing construction risks.

What is Builder’s Risk Insurance?

Builder’s risk insurance, also known as course of construction insurance, is a specialized type of property insurance specifically designed for buildings under construction. Builder’s risk insurance provides coverage for construction projects from start to finish, investment in materials, fixtures, and equipment being utilized throughout the construction or renovation process of a building. If any of these components are damaged or lost, this is where builder’s risk insurance comes in to help.

Coverage Details

Builder’s Risk Insurance policies may vary widely yet generally include the following types of coverage:

  1. Damage to the Structure: Damage to the structure may possibly include damage to the building itself due to wind, fire, theft and vandalism. Each policy will have specific exclusions and limits, so it’s important to have a good understanding of what’s not covered.
  2. Materials & Equipment: Coverage will often extend to the on-site materials waiting to be installed  by contractors, or those materials and equipment temporarily stored off-site, such as tools and equipment.
  3. Soft Costs: Some policies will cover soft costs, such as those included in lost sales, rental income, additional interest on loans, and other financial losses which may be due in part or in full to construction delays caused by a covered loss.

Why Do You Need Builder’s Risk Insurance?

Builder’s Risk Insurance is crucial for several reasons:

  • Financial Protection: Construction involves a significant financial investment in most cases, and unexpected events may occur from time to time. These unexpected events may be costly and insurance may help to protect the investment made and reduce overall losses from a wide range of risks.
  • Contract Requirements: Many contracts will require builder’s risk insurance to protect the interests of the property owner and the financiers against any potential losses during the construction process.
  • Peace of Mind: When you have this type of insurance in place, it can provide a new level of peace of mind for everyone involved in the project. Knowing the financial risks are appropriately managed can be just what everyone needs to gain reassurance

Who Should Purchase Builder’s Risk Insurance?

By purchasing builder’s risk insurance, you’re able to reduce risk if you have a financial interest in the construction project. This reduction in risk may benefit the property owner, the general contractors, subcontractors, and lenders.

Tips for Purchasing Builder’s Risk Insurance

When looking to purchase Builder’s Risk Insurance, consider the following tips:

  1. Assess Your Needs: By assessing your needs and evaluating your specific risks associated with your project, you’ll be able to determine the right level of coverage. You’ll want to consider factors such as the construction project location, the type of construction project, and the materials used.
  2. Choose the Right Coverage Limits: You’ll want to ensure you have the right level of coverage limits and they reflect the total value of the structure, including all estimated materials and labor costs, but exclude the value of the land.
  3. Understand the Policy Exclusions: By understanding what is not covered by your policy, you’re in a better position should anything happen where you can be further prepared in the event of a covered or non-covered scenario. Common exclusions include events such as earthquakes and floods, unless specifically included in your policy.
  4. Work with a Specialist: Due to builder’s risk insurance being quite complex, especially with larger construction projects or renovations, working with a qualified insurance broker or agent can be extremely beneficial.

Contact Portsmouth Atlantic Insurance for Your Builder’s Risk Insurance Needs

If you’re considering purchasing builder’s risk insurance for your construction or renovation project, you’ll want to contact us to see how we can help. By gaining a further understanding of what builder’s risk insurance is, what builder’s risk insurance covers, and how builder’s risk insurance works; stakeholders in the project are able to ensure they’re adequately protected against the financial implications and risks of unexpected events. By utilizing builder’s risk insurance, you’re able to reduce risk, have greater peace of mind, and ensure your project deadlines are met to the best of their ability. We look forward to hearing from you soon!

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