Builder’s Risk Insurance is often required by lending and municipal authorities. It can be required as a condition of many contracts, and it can apply to both new project construction and remodeling projects. It protects the custom builder or general contractor from financial loss due to damage. Builder’s Risk Insurance is sometimes purchased by the ultimate owner of the property, the lending institution, or others.
Most Builder’s Risk Insurance policies cover damage caused by fire, explosions, lightning, hail, theft, vandalism, and damages by aircraft and vehicles. The amount of coverage should represent the total value of the structure, including labor costs and the cost of raw materials; however, the cost of the land value should not be included. The construction budget is a good way to determine the amount of coverage needed.
It is normally taken for a period of three, six, or twelve months, but can be extended if the duration of the construction exceeds the duration of the policy, but only one extension at a time is possible. Builder’s Risk insurance is intended to cover unforeseen damage during the construction period only. Coverage should be effective prior to when the materials are delivered to the job site.
Once the work has been completed and the property is ready for use or occupancy, the policy terminates. Once the Builder’s Risk coverage has expired, the new owner should take out permanent property insurance, such as a home owner’s insurance policy or a commercial property insurance policy.
Generally, Builder’s Risk Insurance does not cover damages caused by earthquakes, employee theft, water damage, contract penalty, flood, wind, war, government intervention, damage to property left in the open, or machinery breakdown. It also doesn’t cover damages that occur as the result of inferior quality materials, inefficient design or planning, or faulty workmanship.
Tools and equipment are not covered. Builder’s Risk Insurance doesn’t cover for liability or accidents that occur at the site. It’s also important to note that Builder’s Risk insurance doesn’t cover property belonging to other people, such as sub-contractors.
Sometimes coverage extensions are needed or recommended, such as…
To get started with the right contractor insurance for your business please contact us at (610) 775-3848 or (800) 947-1270