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Home » What is Included in Builder’s Risk Insurance?
August 4, 2021
Agency

What is Included in Builder’s Risk Insurance?

If you are a project owner, contractor or otherwise have any investment in a construction project, you could stand to lose out financially if the project is put on hold due to a disaster. Bad weather or theft can damage a project while it is being built, pushing your timeline back and your investment at risk.  

That is where a builder’s risk insurance policy steps in. This type of policy can provide compensation if you face financial loss due to a project that is damaged mid-construction. 

Expenses that may be covered under a builder’s risk policy include: 
contractor marking a piece of wood next to a yellow hard hat

  • Property repair or replacement 

  • Equipment and material repair or replacement 

  • Lost sales 

  • Real estate taxes 

  • Rental income 

  • Additional loan interest 

What Items are Covered Under Builder’s Risk Insurance? 
Builder’s risk insurance policies generally help with any physical items involved in the making or building of a construction project such as material, supplies, half-built buildings, equipment in transport and onsite equipment. This can include power tools, pieces of wood, nails, screws and more. 

Some items have limited coverage under a basic builder’s risk insurance policy, so be sure to speak with your insurance agent about possibly adding more coverage to your policy. For example, you can find additional coverage for scaffolding, temporary structures, debris removal, pollutant cleanup and more. 

What Does Builder’s Risk Insurance Not Cover? 

Unfortunately, builder’s risk insurance won’t cover everything that could cause damage to a construction project. Common exclusions under builder’s risk insurance often includes: 

  • Faulty design (professional negligence or liability) 

  • Normal wear and tear, including rust and corrosion 

  • Mechanical breakdown 

  • Employee theft 

  • Acts of terrorism or war 

  • Flood 

  • Earthquake

  

If a construction project suffers damage or loss due to any of the above, you may not be covered under a basic builder’s risk insurance policy. While many policies have set exclusions, you should ask your insurance agent about any additional offerings that might help fill the gaps left by your builder’s risk insurance policy. 

Does Builder’s Risk Insurance Cover General Liability? 
General liability and builder’s risk insurance are not the same, nor is general liability insurance covered by builder’s risk policies. Builder’s risk insurance is a type of commercial property insurance designed to cover the physical assets related to construction work whereas general liability covers bodily injury and property damage someone else may suffer. 

For example, say you are leading a construction project and overnight, a bad storm ruins the equipment left on the site and sweeps away several of the materials. In this case, you would file a claim on your builder’s risk insurance policy to cover the damages and other expenses caused by a possible delay. 

On the other hand, say that a visitor on your construction site trips over a piece of equipment and breaks their leg. General liability insurance can cover the victim’s medical bills and protect your business in the face of a related lawsuit. 

When Does Builder’s Risk Insurance End? 
Builder’s risk insurance operates differently than many other commercial insurance policies in that it only covers for a specific amount of time. Generally, the policy begins once the contract for construction has been signed by all parties and ends once the project is completed and approved. Once the contract is fulfilled, you will need another builder’s risk insurance policy for the next project. 

You cannot receive a refund if you don’t file a claim on your builder’s risk insurance policy or if you cancel your policy before the project ends. However, you can renew a builder’s risk insurance policy for the same project if said project is delayed or goes on longer than initially expected. 

Cancelling your insurance before a project is completed or failing to purchase builder’s risk insurance before a project starts can leave you facing expenses for an accident out of pocket, such as repairing or replacing damaged equipment.  

It is important to keep all of the project’s assets safe, but this isn’t always possible, especially with buildings that are half finished.  

Who is Covered Under Builder’s Risk Insurance? 
Anyone who has financial stake in a project’s completion should be covered under builder’s risk insurance. Since this insurance helps speed up the process of a delay and cover unexpected expenses, it us useful for general contractors and their subcontractors, the property owner, lenders and architects. 

In fact, some project managers or property owners may carry builder’s risk or require their hired general contractors to carry builder’s risk until the project is complete in order to cover their investment. 

Connect with an insurance agent and ensure that you and other people invested in the project understand who is responsible for carrying builder’s risk insurance