Builder’s risk insurance

General contractors take on big projects, which can come with big risks. An incident that destroys your hard work could also bankrupt your company.

For example, a fire sweeps through a construction site, scorching the siding of an unfinished building. To replace the siding, the general contractor makes a claim on their builder’s risk policy and is reimbursed for the cost of repairs.

Carpenters who are building new structures such as garages, sheds, and homes should invest in builder's risk insurance to protect the structure and their materials.

For example, freezing rain could damage the lumber stored at a construction site. The carpenter is responsible for replacing it, so they can turn to their builder’s risk insurance to cover the cost.

Electricians working on new homes and offices should consider investing in builder's risk insurance.

For example, a thief breaks into a construction site and makes off with thousands of dollars' worth of copper wire. The electrician uses builder’s risk insurance to cover the cost of replacing the stolen wire.

Because they could find themselves financially responsible for damages, architects should secure builder's risk insurance during the construction of any structure they designed.

Engineers who are involved in the structure's design and construction should also be covered by builder's risk insurance while the work takes place. If a fire or other incident occurs, the policy will pay for any damages that could be passed along to the engineer.

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.