As a contractor, you know every construction project has its fair share of risks. From natural disasters to vandalism, a lot can go wrong on a job site. That’s where builder’s risk insurance comes in. This essential coverage helps protect your investment, your reputation, and your bottom line.

In this guide, we’ll dive deep into builder’s risk insurance, discussing what it is, what it covers, and how to choose the right policy for your projects.

What Is Builder’s Risk Insurance?

Builder’s risk insurance, sometimes called “course of construction” insurance, is a specialized type of property insurance that protects the structure and materials of a construction project while it’s underway. This coverage is designed to safeguard contractors and project owners against potential losses caused by various hazards, like fires, theft, and severe weather.

In essence, builder’s risk insurance provides financial peace of mind by covering the costs of repairing, rebuilding, or replacing damaged property in the event of an unexpected setback. But remember, each policy is different, and specific coverages vary depending on the insurer and the project’s unique needs.

What Does Builder’s Risk Insurance Cover?

While the specifics of each policy can differ, builder’s risk insurance generally covers the following:

  1. Physical Damage: This includes damage to the structure itself, as well as any materials, fixtures, and equipment used during construction. Common perils covered are fire, wind, theft, and vandalism.
  1. Soft Costs: These are the expenses that arise due to a delay in the project due to a covered loss. Examples include additional interest on loans, real estate taxes, and loss of rental income.
  1. Debris Removal: In the aftermath of a disaster, this coverage helps pay for the cost of removing debris and cleaning up the job site.
  1. Temporary Structures: Builder’s risk insurance can extend to temporary structures built on the job site, like scaffolding and storage facilities.
  2. Transit and Off-Site Storage: Some policies will also cover materials and equipment in transit to the job site or stored off-site, ensuring they’re protected at all times.

It’s important to note that builder’s risk insurance typically does not cover accidents, injuries, or property damage caused by faulty workmanship, materials, or design. For those liabilities, contractors should have general liability insurance in place.

Choosing the Right Builder’s Risk Insurance Policy

Selecting the right builder’s risk insurance policy requires careful consideration of the project’s unique needs and potential risks. Here are some key factors to keep in mind:

  1. Policy Limits: The policy’s coverage limit should be based on the total completed value of the project, including labor and material costs. It’s crucial to have an accurate estimate of these costs to ensure you’re fully covered.
  1. Deductibles: Higher deductibles can lower your premiums but also increase your out-of-pocket costs in the event of a claim. Strike a balance that works for your financial situation.
  1. Coverage Extensions: Consider adding endorsements to your policy to cover specific risks that may not be included in a standard builder’s risk policy. For example, add flood or earthquake damage coverage if your project is in a high-risk area.
  1. Policy Duration: Builder’s risk insurance policies are typically written for specific project duration, often 6, 9, or 12 months. Be sure to choose a policy term that aligns with your project’s timeline, and remember to account for potential delays.
  1. Insurer Reputation: Work with a reputable insurance company with experience in the construction industry. They’ll be more likely to understand your project’s unique risks and provide the necessary coverage.

Final Thoughts

Builder’s risk insurance is crucial to any contractor’s risk management strategy. By understanding the ins and outs of this coverage, you can protect your investment and ensure the success of your construction projects. With the right policy in place, you can focus on what you do best: building incredible structures and leaving your mark on the world.

If you are looking for builder’s risk insurance, we can help you! Pascal Burke Insurance Brokerage Inc is where contractors got to get insured! We are specialists in various policies covering general cases and specialty contractors. Contact us today to learn more and get started. Get a fast quote online!