A Quick Guide to Builder’s Risk Insurance Coverage

When you are working on a site, builder’s risk insurance coverage, or course of construction coverage, will be vital if not required for your job site. Builder’s risk is a type of property insurance that helps to cover an area’s tools, supplies, and equipment while it is being constructed whether it’s a new construction or renovation.

Many times, a builder’s risk insurance policy will cover just the structure that is being built.  Other times, you can also cover the materials on the way to the site and at the site waiting to be added to the building. As mentioned, it’s commonplace for building owners to request this type of insurance with a job site or bid.

Today, we’re going to talk about what is covered with builder’s risk insurance, what isn’t covered, what the general cost is, and how long the coverage lasts. Like with other insurance policies a general contractor can buy, builder’s risk will only cover anything up to specified coverage limit for one construction project. When determining what your limit will be, looking at the construction budget and factoring in labor and cost will be the best way to determine how much insurance you should purchase.

What does Builder’s Risk Cover?

In general, you’ll find that builder’s risk covers everything that has to do with the actual construction of the building and site while not covering the land around it or the tools of the construction company. Looking at examples of what is covered, take a look below:

  • Construction Materials
  • HVAC Equipment
  • Labor costs
  • Scaffolding
  • Signage
  • Plants and Trees
  • Cribbing
  • Fencing
  • Falsework
  • Profit

As talked about above, these are mostly items that are directly connected to the building you are working on. However, in most pricy policies, you can also cover the profit that was lost due to the event that caused the claim. Never though, will you see property damage covered by the insurance policy. Now, let’s look at the top two reasons that you might call your insurance company to make a claim on your insurance coverage.

  1. Nature Events: Fire, wind*, lightning, hail, earthquake*, and flood* are all examples of what could be covered by your builder’s risk policy. Continue reading below about the exclusions that might affect this.
  2. Human Factors: Vandalism and theft could affect your site worse than nature in many cases as it’s often pointed and specific. Luckily, your insurance policy should cover these incidents.

What’s Not Covered in Builder’s Risk?

Each policy within builder’s risk will cover different items. Exclusions and limitations are what isn’t covered within these policies. However, there are a few things that are more controversial and don’t often get included in the policies.

Insurance providers will often exclude or limit employee theft, environmental damage to the property and governmental issues like war and policy. As talked about above, there are instances that earthquake, wind, or flood damage is available but this is regional and limited in nature.

What Does Builder’s Risk Coverage Cost?

Builder’s risk cost is usually 1-5% of the total construction budget. Since most employers and job opportunities will desire coverage, you should work to make sure that it will fit into your budget.  If something happened, this insurance could save you thousands or more.

How Long Does Builder’s Risk Insurance Last?

Your policy will last for three, six, or twelve months along with one extension. You can take this insurance out until the project completed or space is occupied. When the project is done, a new type of insurance will be needed.

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