The basics

What is builder’s risk insurance?

Are you a project owner, general contractor, subcontractor, or lender looking for info on construction insurance policies? You need to purchase a builder’s risk insurance policy if you are financially invested in a piece of property that is being constructed or renovated. Builder’s risk insurance is a type of small business insurance policy that protects you against certain losses during the process of constructing buildings. It may even be required in some construction agreements.

When it comes to a builder’s risk policy, there are no standard clauses. Because there are different levels of builder’s risk policies, you must choose a level that best covers your upcoming construction project.

Wondering if builder’s risk insurance is always necessary? It is if you are financially invested in a construction or renovation project. Also called ‘course of construction insurance’, a builder’s risk insurance policy is one that helps protect buildings during the construction process. It really is important for you to have a properly structured builder’s risk insurance policy, as this ensures that it will completely protect you and your construction business.

A builder’s risk insurance policy covers you from the very beginning of the project to the very end!

The coverage

What does builder’s risk insurance cover?

How does builder’s risk insurance protect a small construction business? It not only helps cover any buildings that are under construction that become damaged due to weather conditions, it also helps protect against damages to materials, supplies, and equipment. Additionally, builder’s risk insurance can help cover any financial losses caused to a delay, including lost sales, rental income, and real estate taxes.

Builder’s risk insurance covers property damages due to:

  • Fire – covers the cost to replace or repair items damaged by fire
  • Lightning
  • Hail
  • Explosions – covers cleanup and debris removal costs
  • Theft – if someone steals copper pipes on-site, the stolen pipes will be replaced
  • Vandalism – if someone vandalizes the electrical wiring from an unfinished structure requiring it to be rewired, repair costs are covered
  • Acts of God, like tornadoes 

What is excluded?

A builder’s risk insurance policy is going to contain some exclusions, making it essential for you to understand any exclusions contained in your policy before purchasing. 

Coverage exclusions commonly include:

  • Wear and tear
  • Employee theft
  • Employee injuries
  • Rust, corrosion
  • Mechanical breakdowns
  • Cost to repair or correct faulty subcontractor work
  • Damage due to faulty designs
  • Damage to tools and equipment 
  • Planning
  • Workmanship, materials
  • Engineers 
  • Business vehicles
  • Acts of war, terrorism
  • Damage that occurs after the project has been completed 
  • Earthquakes – a natural disaster so usually excluded
  • Floods – a natural disaster so usually excluded
  • Winds – a natural disaster so usually excluded
  • Beach zones – usually excluded

Who needs builder’s risk insurance?

Examples of business professionals who need builder’s risk insurance include:

Supplementary builder’s risk insurance coverages include:

  • Equipment or supplies breakdown
  • Equipment in transit
  • Fungi or microbes
  • Trees and plants

TIPS

  • Read the entire insurance policy before accepting
  • Know your coverage start and end dates to make sure there are no gaps in coverage 
  • Try to choose a coverage amount that is at a minimum equal to the cost of the construction project

FAQs

Does builder’s risk cover liability?

No, it does not. If you are in need of liability insurance you need to choose a general liability and/or a professional liability insurance policy. 

Can I increase builder’s risk insurance coverage after starting the construction project?

Yes, it is possible for you to increase the amount of coverage you need after starting the project. 

How long does a builder’s risk insurance policy last?

It depends. Generally speaking, builder’s risk insurance policies last between three months and one year. It is possible to renew a builders risk insurance policy.

The cost

How much does builder’s risk insurance cost?

Every construction project is going to be different, which means the cost of every builder’s risk policy is going to be based on each specific project. As a rule of thumb, you can expect your premiums to cost somewhere between 1% and 5% of the cost of the project.

The cost of your builder’s risk insurance policy depends on things like:

  • The type of project you will be working on
  • The type of construction materials you will be using
  • How long the project will take to complete
  • The location of the project
  • The square footage of the construction site
  • The quality of the construction materials used
  • How much experience other professionals involved in the project have
  • Any risks associated with the project
  • The details of your policy – coverage amounts, limits, etc.

Anyone who is financially invested in a construction project needs to get a builder’s risk insurance policy. When three or more parties work together it is often the general contractor who purchases the policy, acting as the primary insured. Other parties will be listed as additional insureds.

Your unique construction risks

No two builder’s risk policies are going to be the same. We can help you choose the right type and right amount of builder’s risk insurance. We can also get free quotes for you from more than 30 top insurance carriers to make sure you are not paying more than you have to in small business insurance. Got a few minutes to fill out a quick form so you can start saving? 

Getting the best small business insurance quotes has never been easier!