What is Builders Risk Insurance?
Builders risk insurance, also known in some areas as course of construction insurance, is a type of property insurance which covers a building where the structure itself, or insured area within, is presently under development, renovation or construction. Builders risk coverage can include protection for construction materials, heating and air-conditioning equipment, labor costs and expenses as well as temporary structures such as cribbing, false work, fencing, scaffolding, construction signs and even trees and other plants. While this type of insurance is not mandated by law, it is generally required for contractors/sub-contractors by their clients. Builders risk insurance is typically purchased for three, six, or twelve months, depending on the projected life of the construction. Most policies can be extended fairly easily at least one time, however additional extensions may be more difficult to obtain. It is best to advise your agent at the time the policy is purchased if you believe the project will run more than 12 months so they can negotiate renewal options based on a realistic view of the time necessary to complete the project.
A builders risk policy will typically provide coverage for damage done to the insured structure due to a variety of events such as the following:
- Wind (depending on your geographic location).
- Vehicles / Aircraft.
There are also exclusions to every policy, varying from carrier to carrier and geographic region. Some exclusions include:
- Employee theft.
- Water damage.
- Weather damage to property in the open.
- Government action.
- Contract penalty.
- Voluntary parting.
- Mechanical breakdown.
Additional coverages can be purchased to address these exclusions, such as inland marine to protect your tools and equipment left on site from exposures such as theft and vandalism. It should also be noted that design risks should be covered by some type of professional liability, such as contractors liability insurance. To fully understand your coverage you should contact a builders risk insurance specialist who will help you in estimating perils and limits for your specific construction project.
1As reported by the National Fire Protection Association, April 2017.