Builders Risk Insurance
You may have heard that you need builders risk insurance for your business or your next home building project. Before you buy the first policy you come across, it’s a good idea to learn more about the options available, how builders risk coverage works, and how this type of insurance protection protects you or your business.
Here’s what you need to know to help you get started.
What is a Builders Risk Policy?
Builders risk insurance is insurance that goes by many names, including:
- Builders risk insurance
- Inland marine coverage
- Course of construction coverage (COC)
The insurance exists to protect buildings in various stages of construction. Not only does it cover the structure of the home during construction, but with the right policy, it can also cover the building materials onsite as well as articles in transit to the job site (that would be the inland marine portion of the policy).
Savvy homeowners request their contractors to have this type of insurance before commencing the project.
The policy is in effect for the duration of its term, usually 3, 6, or 12 months.
Who Needs a Builders Risk Policy?
It might be surprising to learn about all the people who need a builders risk policy. These are just a few of the highlights.
- Home or property owners
- Buy and flippers
- Housing community development companies
- Retail companies
- Investment companies
- School districts
Whether your construction project is new construction or home improvement, renovation, or extension, this is the type of insurance you need to protect the property and materials.
While many home or property owners require contractors to obtain builders risk insurance and provide proof, if you’re doing the construction yourself, you’ll want to obtain the insurance for yourself.
What Does Builders Risk Insurance Protect?
Because every building project is different, no two builders risk insurance policies are identical. For the most part, these policies protect the following, plus additional endorsements or features purchased by the policyholder. These are some of the standard covered things by most builders risk policies:
- Building and structures while under construction
- Materials and supplies onsite or in transit
- Labor costs
- Business income or loss of rental income
You’ll need to verify the specific types of coverage you’ll require and the amount of coverage, with a trusted independent insurance agency, like The Insurance Center of North Jersey to determine your comfort zone for coverage.
Some policies extend protection to uninsured sheds, temporary structures, etc. within 100 feet of the construction area, provided that structure is being used to make repairs, alterations, etc. of the building. You should also seek a policy that offers coverage for debris removal stemming from a covered loss. That can save you a lot of money and is well worth the additional investment.
What Kind of Damage Does Builders Risk Coverage Include?
The better you understand the coverage available for builders risk insurance, the likelier it is you’ll get the right protection. Covered damage on most policies include:
- Weather (wind, lightning, hail, etc.)
- Theft (though not employee theft)
- Damage from vehicles or aircraft.
These instances are likely to be covered by most insurers. Some insurers offer more robust coverage and protection than others, though, so keep that in mind as you explore your options. If you work with us, we’ll sit down and make sure you have the coverage you want so you can have peace of mind moving forward on your project.
Coverage Extensions for Builders Risk Coverage
Builders risk coverage offers a surprising number of extensions to their policies. Depending on the type of project you’re working on and the existing insurance of homeowners, you may wish to invest, as a homeowner or builder, in one or more of the following extensions:
- Debris removal. If not included in the initial policy
- Sewer and drain backup
- Property damage from sewer and drain backup
- Valuable papers
- Property in transit
- Fire department service charges
- Temporary structures and property in temporary structures
Some of these may be included in your policy. If not, it’s a good idea to purchase extensions to include them in your protection. The idea of builders risk insurance is to limit your financial exposure if something happens on the job site, such as a storm, a fire, or someone comes and takes it all away while the job site if vulnerable. After all, some building materials are easy to transport and high in value, making them attractive targets for thieves and vandals.
Builders Risk Insurance Exclusions
There are some things builders risk insurance specifically excludes from coverage. The insurance will not pay for damage related to these events or situations:
- Sub-contractor equipment, supplies, etc.
- Professional liability
- Tools and equipment
- Accidents and injuries
Of course, individual policies may have different specific exclusions. You’ll need to study your policy to understand thoroughly what is excluded from coverage and purchase riders, as needed, for more robust protection.
Commercial Builders Risk
Commercial buildings in various stages of completion are vulnerable to a variety of weather, theft, and other hazards. This includes lightning, fire, hail, vandalism, wind damage, equipment theft, building material theft, and other malice and mischief acts. That’s why commercial builder’s risk insurance is an essential investment when large commercial buildings are under construction.
Commercial builder’s risk insurance, like a personal builder’s risk insurance, often covers the structure for a specified time of construction. Because commercial construction projects can take considerably longer than residential projects, you may need to identify longer terms to provide adequate project completion time.
Who Needs Commercial Builder’s Risk Insurance?
There are many people who benefit from builder’s risk policies, including those that cover commercial builders risk insurance policies. These policies serve to insulate financial losses when covered events occurred, creating multiple interested parties, including the following:
- Business owners
- Retail organizations
- Investment companies
- Building flippers and renovators
- Mortgage Companies
Anyone who has an interest at stake with the finished product can benefit from builder’s risk insurance to help mitigate the damage to their interests when covered losses occur.
Commercial Builder’s Risk Coverage Options
There are multiple coverage options to consider when it comes to effective commercial builder’s risk insurance. Understanding the options available can help you make wiser decisions about the specific coverage options you need in addition to the standard protection available.
- Time-based coverage. This is especially beneficial to builders who receive bonuses if the project is completed by a specific date. Unfortunately, when certain events occur, it costs critical time in addition to the added costs. This protection can help builders recover, at least some of, their losses in such situations.
- Rental value coverage. If you’re working on a commercial property with active renters, you could be eligible to recover lost rents if a covered event displaces them. But only if you have this specialized protection.
- Soft cost coverage. These cover expenses that aren’t directly related to the building, equipment, and materials, such as legal fees, engineering costs, financing costs, and architect fees — among others. This coverage is available for multiple types of soft costs, and you will need to decide which ones you’d like to cover.
- Defective workmanship protection. This is specifically excluded from your builder’s risk insurance policy. However, there is coverage available to protect building owners from faulty work by construction crews and others.
Trust The Insurance Center of North Jersey for Your Builders Risk Insurance Needs
We’ve been in the business of helping construction businesses and homeowners protect their homes and businesses for more than 90 years. Today we offer a wide range of insurance products from many insurance providers to help you create a truly customized builders risk insurance policy.