Builders Risk Insurance

What Does Builders Risk Insurance Cost?

Builders risk rates will be determined by project length and required limits of protection, as well as included/added coverages. It is very important to be as accurate as possible when determining coverage length and limits, being careful to not over or under estimate. The general suggestion for basing your limits is to use the total value of the structure, including all materials and labor costs and excluding land value. Having an accurate construction budget is the best start to understanding how much coverage to purchase for your project. Your rate may be calculated from construction costs, between one and four percent, typically.

What are Common Builders Risk Claims?

According to the International Risk Management Institute (IRMI) water damage is the number one cause of builders risk claims with about 45 percent of all claims (2015). Theft/burglary make up 10 percent of claims, making it the second most common. Fire (6 percent), wind storms (4 percent) and collapse (3 percent) are also notably common. However, "other" describes 30 percent of claims, meaning there are numerous other ways builders risk can cover your job site. Knowing your site-specific risks is extremely important before purchasing coverage.

While builders risk mostly applies to property damage, and faulty work is not covered, the subsequential damage can be. For example, if faulty construction led to infiltration of rain water, builders risk will cover the resulting damage. Note, that rain water damage is covered, but sewer water damage may not be. A few more builders risk claim examples include:

• Vandals break into work site and start fire which leads to damage throughout site.
• Removal of temporary propane tanks causes damage to the exterior walls of the project.
• Heavy wave conditions caused damage to underwater piling resulting in the need for significant remodel work. (This is also a good example of knowing your site-specific exposures and why you should try to minimize them.)

How Can I Reduce my Risk?

Reducing your builders risk exposures starts with identifying all conceivable perils to project. The best second step is documenting them and creating mitigation plans for each risk. For example, if you know your project is located in a high-crime area you may increase your security procedures for this project. Another example would be ensuring your job site is covered and protected before wind or rain storms are predicted. Once you identify perils and their mitigation plans, make sure to train job site employees on safety and preventative procedures.

Frequently Asked Questions

1. Will builders risk cover materials for my job, even if they are not on site yet?

Typically, builders risk policies will cover materials located on site with some additional and often limited coverage to materials kept off-site or in transit. Make sure to tell your agent if you think you need coverage for tools and equipment either on-site, off-site or in transit.

2. What if my company carries inland marine and general liability, do i still need builders risk?

The best way to know if you need builders risk is to contacta construction and commercial insurance specialist. One of our experts can look at all your other business insurance policies and help you make a list of gaps in coverage. You will need to identify specific perils on job site as well as project limit needed before assessing if your current coverage will apply.

3. Does builders risk cover my work after completion?

Builders risk alone may not cover completed work. Faulty workmanship or flaws in design/specifications will need a form of professional liability, such as contractors liability.

4. Who is covered?

The property owner is typically the named insured, while others such as contractors, subcontractors and financial lenders can be added as additional insureds.