What is builder’s risk insurance?

Builder's risk insurance covers damage to a construction project caused by weather, fire, vandalism, or theft. If an unexpected event harms the structure or materials on your construction site, this insurance policy 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 for construction and contracting businesses. In fact, your clients might request that you carry this policy before you begin work, or it may be required by local building codes.

Learn more about builder's risk insurance coverage.

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, 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.

Builder's risk 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, such as tools and equipment or materials.

Other builder's risk policies might include this protection. When you buy insurance, confirm with your agent what your policy does and does not include to make sure you get the coverage you need.

Builder's risk insurance is crucial for structures under construction, but it doesn't protect against every risk. Construction business owners and contractors should consider additional coverage including:

• General liability insurance
• Workers' compensation insurance
• Commercial auto insurance
• Contractor's tools and equipment insurance
• Professional liability insurance