Builder's Risk Insurance Broken Down

What is Builder's Risk Insurance Specifically?

Builder's risk insurance is one of many forms of property insurance designed to cover new construction (ground-up) or even renovations to an existing structure (but not the current structure itself).

What is Covered by Builder's Risk Insurance?

A builder's risk policy covers any property that will become a permanent construction element, regardless of who owned it before installation. It also covers things included in the contract price while they are en route to the job site or kept at a place other than the job site.

Who Purchases Construction Risk Insurance?

Owners and contractors purchase builder's risk coverage, although it is typically simpler for a contractor to acquire coverage via a reporting form insurance for residential buildings. The project's value should be the building cost, including labor and profit but excluding land.

What is Covered and What is Not Covered by Builder's Risk Insurance?

Standard builders' risk plans do not contain coverage for flood, earthquake, equipment breakdown, or testing of HVAC or electrical systems; however, these coverages can typically be added for an increased premium. The builder's risk is intended to cover all claims for property damage on an insured site, including theft of materials that will form a permanent part of the site and damage from wind, hail, and fire.

Items that will not become a permanent part of the construction, such as the contractor's tools, are still protected by the contractor's insurance coverage (and not the builder's risk). However, the builder's risk may cover scaffolding and temporary structures.

What Makes Builder's Risk So Vital?

A builder's risk insurance is intended to protect the interests of the project's owner, contractors, and subcontractors. A builder's risk policy is essential for a construction project since it eliminates the question of who is at fault if someone's activities cause property damage to the structure.

Builder's risk is the most comprehensive coverage available to protect all parties with a financial stake in a new building project. The owner's property policy typically covers the existing structure throughout renovations, and the standard property policy frequently covers the renovations. A builder's risk or installation floater can cover renovation work until the owner of the property insurance accepts it cannot support the work in its policy form.