Builder’s risk insurance

A builder's risk insurance policy covers damage to a construction project caused by non-severe weather events, fire, vandalism, or theft. If an unexpected event harms the structure or materials on your construction site, this insurance coverage pays for the repairs or replacements needed to get the project back on track.

Because of this protection, builder's risk insurance is a key policy in the construction industry. In fact, your clients might request that you carry this policy before you begin work, or it may be required by local building codes.

Any business owner with a financial interest in the project should secure this coverage. In some cases, the homeowner may buy this coverage and add you to their policy as an additional insured.

If you rely on lenders to finance a construction project, they might require you to have this coverage, and to be listed on your policy as a loss payee.

Builder's risk insurance covers a structure in progress during its construction, as well as materials. This business insurance policy will pay for repairs and debris removal in the event of a fire, or the cost of replacing lumber stolen from a worksite. Specifically, builder's risk insurance provides coverage for:

Construction companies and contractors should invest in builder's risk insurance while they are building or renovating a house, garage, office, or other structure. Anyone with a financial stake in the project, from the homeowner to the building designer, should carry this coverage.

This insurance policy can keep your company financially stable while you recover from the aftereffects of a storm or fire. It's strongly recommended for all construction projects, especially in areas where theft and vandalism are major risks. For some contracts, it may be required.

You might also need additional coverage. For example, general liability is often the first policy that most small business owners purchase. Depending on the type of work you do, you might also need professional liability coverage, or profession specific coverage such as contractors all risks insurance.

While builder's risk insurance provides crucial protection for structures in progress, it does not cover every risk. For example, you'll still need general liability insurance to protect against accidents that injure someone or damage their property, along with commercial auto insurance for any vehicles owned by your business.

Common exclusions for builder’s risk insurance include:

Builder's risk insurance covers structures under construction, but it doesn’t protect against many other types of business risks. Construction and contracting business owners should also consider:

General liability insurance: This policy can cover expenses related to client injuries and damage to a customer’s property.

Business owner's policy: A BOP bundles general liability coverage and commercial property insurance at a discount. It protects against the most common lawsuits and property damage.

Workers’ compensation insurance: Workers’ comp covers medical costs for work-related injuries and illnesses. Most states require this coverage for businesses with employees.

Professional liability insurance: This policy covers professional mistakes and oversights, such as a contractor missing a project deadline.

Surety bonds: These bonds reimburse your clients for financial losses if your company is unable to fulfill the terms of its contract. They may be required to qualify for contracts or obtain a construction permit.

Contractor’s tools and equipment insurance: Covers the cost of repairing or replacing your tools and equipment if they’re lost, stolen, or damaged. This typically applies to equipment that is less than five years old.

Builder’s risk insurance is a type of commercial property insurance that lasts only for the duration of a construction project. The policy usually goes into effect before the first building materials arrive at the job site, and coverage ends as soon as the project is complete.

Depending on the insurance company, this coverage may be added as an endorsement or purchased as a standalone policy. The policy can cover an existing building under renovation or new construction.

You might wonder who is responsible for builder's risk insurance. Anyone with a financial stake in a construction project can purchase a builder’s risk policy to protect their investment from theft and property damage. That includes general contractors, carpenters, subcontractors, building owners, commercial builders, and developers.

If the property owner or developer buys the policy, contractors or subcontractors may want to make sure they are listed as a named insured. You may need to have a discussion with all involved parties to clarify who is responsible for buying the policy and who is listed on it.

This type of insurance is usually more important for contractors than property owners, since courts typically hold contractors liable for construction site damage.

Builder's risk insurance and course of construction insurance refer to the same coverage. The only difference is what the insurance company chooses to call the policy.

However, there are differences in what your insurance company might include in your policy. With some policies, you may need to add inland marine insurance to cover items in transit or stored off-site, such as tools and equipment or materials.

Other builder's risk policies might include this protection. When you buy a policy, confirm with your insurance agent what it does and does not include. They can help you secure any additional coverage you might need.