Builder’s risk cover is a type of contractor insurance that applies during construction. It’s essential for builders wanting to avoid on-site losses. 

However, it can be confusing. Therefore, this post explores what builder’s risk insurance covers, how lenders package it, and the exclusions/limitations you can expect when taking out a policy. 

What it covers

Builder’s risk insurance covers various losses and damages that can occur on construction sites during projects. However, policies can vary significantly. Some are comprehensive (meaning they cover nearly all losses), while others are more specific. 

Items builder’s risk insurance can cover include: 

• Theft
• Property damage
• Arson
• Damage to materials in transit to the building site
• Removal of debris
• Backed-up sewers and drainage systems
• Damage by hail or wind
• Collapse risk

However, don’t take this list as gospel. Always check the policy wording to see if the insurer includes all the coverage you want. Sometimes, you can ask them for additional coverage in exchange for higher premiums. 

Project-specific coverage

Some builder’s risk insurance policies provide blanket protection throughout the year. These are helpful for contractors involved in numerous residential and commercial projects (i.e. 25 or more annually), reducing paperwork and streamlining applications. 

However, you can get a “single policy” for new construction and remodeling projects. These are helpful when you want builder’s risk insurance as a one-off and only want to cover a single site. 

Builder’s risk insurers will cover several project types, depending on your requirements. However, you must provide them with this information upfront.

Most contractors opt for builder’s risk insurance to cover new constructions. These can include home and apartment developments, condo buildings, and duplexes. It is also available on commercial projects. 

Another type, remodeling builder’s risk insurance, applies when changing a building’s function or structure. For example, you could get insurance if you add a mezzanine level to a living area or extend a building. 

Lastly, you can sometimes get installation-related builder’s risk insurance. Unlike a complete remodel, this covers single fixtures and fittings, like cabinets or awnings. 

Exclusions and limitations

Unfortunately, builder’s risk insurance won’t protect you against everything. As such, you may need to add other insurance products to your stack. 

Like most insurance offerings, builder’s risk insurance doesn’t protect against force majeure. It won’t pay out for acts of war, terrorism, or other government actions (like property confiscation). 

It also doesn’t cover contractor or employee injuries – one of the most common building site claims. For this, you will need workers' compensation and public liability insurance. 

Other exclusions can include: 

• Extreme geological events, like earthquakes
• Intentional acts of destruction
• Damage due to preventable design flaws or plans
• Vehicle damage 
• Depreciation

Contact Us Today to Save on Builder's Risk Insurance!

Still confused? Contact American Insuring Group for the best rates on builder’s risk insurance. As independent brokers, we shop the market to find you the best deal on quality insurance! So call us today at (610) 775-3848 or click here to start saving. 

If you get hired as a subcontractor, don’t assume that the general contractor’s Contractors Insurance covers you. As a subcontractor, you are NOT considered an employee of that contractor, and Contractor’s Insurance rarely covers subcontractors. Often, injury or damage caused by a subcontractor is specifically excluded from contractors' insurance policies.

And we don’t have to tell you how dangerous your occupation is. The chances of you or one of your employees injuring themselves or causing damage or injury to something or someone else is not out of the range of possibility.

In fact, according to Safety + Health magazine, a construction worker has a 75% likelihood of experiencing a disabling injury and a 1-in-200 chance of being fatally injured on the job. And don’t think because you own a small company that you’re immune to these statistics. According to the Centers for Disease Control and Prevention, “Nearly half of all deaths on construction sites occur in companies with ten or fewer employees or among those who are self-employed.”

While there are no laws that require you to purchase insurance as a subcontractor, you can see why it’s the smart thing to do. Plus, many contractors will require that you have certain types of insurance to work with them.

4 Types of Insurance Every Subcontractor Should Consider:

Commercial General Liability (CGL) Insurance

CGL is one of the most important insurance products for any business. CGL protects your business if you are liable for property damage. It covers the cost of medical and legal expenses and damages if you are found liable. One serious lawsuit can put you out of business if you don’t have the right protection.

Here are three examples of situations where CGL can help:

• Someone visiting your job site trips and falls over materials and is injured.
• An employee leaves the water running in the sink of a customer’s home and causes damage to the home.
• Someone walking by your job site is hit by flying debris and dies.

As a subcontractor, you have two options: you can ask the general contractor to add you as an “additional insured” to their CGL policy, or you can purchase CGL on your own. Most general contractors will require that you purchase your own CGL policy and will very likely include this requirement in your contract and ask you to provide proof of insurance. When you talk to your insurance agent, make it clear that you are purchasing CGL is a subcontractor, not a general contractor.

Workers’ Compensation Insurance

If you are a sole proprietor and are injured on the job, would you have enough money to cover medical expenses? As s a sole proprietor would you be able to continue to provide for your family if you were unable to work for a month or two due to a worksite injury? Workers’ Compensation Insurance will help pay your medical expenses and even lost wages until you are back on your feet.

If you have employees, most states required (with a few exceptions) that you have Workers Comp for each of your employees. WC covers medical expenses, lost wages, and rehabilitation costs if an employee is injured or killed on the job.

Another benefit of workers’ comp insurance is that it covers legal costs if the injured employee were to sue your business.

Commercial Automobile Insurance

If you use a vehicle (which, of course, most in the construction industry do) to conduct business such as transporting materials, equipment, or employees, you should have commercial automobile insurance to help protect you in the event of an accident that causes bodily injury, loss of life, or property damage. 

A personal auto policy may not be enough as certain types of vehicles can be excluded from those policies, and it may not offer high enough limits.

Builders Risk Insurance

Builders Risk Insurance (Aka Course of Construction or Inland Marine Coverage) covers a building under construction along with materials related to the project. It typically provides coverage for damage caused by fire, wind, theft, lightning, hail, explosion, and vandalism. Standard exclusions include events such as an earthquake or employee theft.

We'll Help You Find the Contractor Insurance That's Right for You!

An insurance agent (like those at American Insuring Group) who specializes in Contractors Insurance can help ensure that you have the right insurance to protect your business. The independent agents at American Insuring Group will compare the cost of that coverage with several insurance companies to ensure that you get the best price on the protection you need! Give us a call at (800) 947-1270 or (610) 775-3848 or connect with us online.

Insurance is a way to protect the things you have of value – vehicles, employees, buildings, etc. But what if you’re in the process of building or remodeling a structure? Does it have any value? Of course, it does, and it is susceptible to damage just like anything else, which is where Builder’s Risk Insurance comes into play. 

According to the National Fire Protection Association, between 2010 and 2014, fires in structures under construction resulted in $172 million in property damage every year, and fires in structures undergoing major renovation resulted in $108 million in direct property damage each year. And that’s just fires. Structures can also be damaged by vandalism, theft, severe storms, and more.

Therefore, it’s imperative that you protect these project just as you would anything else of value. Here’s what you need to know about Builder’s Risk Insurance. 

What Is Builder’s Risk Insurance?

Builder’s Risk Insurance (Aka Course of Construction) is temporary coverage for damage or loss to a structure that is being constructed or renovated.

If your existing property insurance doesn’t cover renovations or additions, Builder’s Risk Insurance can fill that gap. Most owners and lenders, along with most local, county, and state building and code enforcement agencies will require a contractor to have builder’s risk insurance.

Property owners, builders, financial institutions, contractors, or development/investment companies typically purchase Builder’s Risk Insurance, and additional parties may also be protected under an additional named insured clause.

Builder’s Risk Insurance is usually purchased before or on the date of construction when the contract is signed. If purchased after construction begins, the percentage of the work is completed will be considered.

These policies can be written in three, six, or twelve months terms, and can typically be extended (one time) if a project is not done on time.

What Does Builder’s Risk Cover (and Not Cover)?

Builder’s Risk insurance may just cover the structure, or it may also include materials and/or equipment used in the project. Each policy is different, so it’s essential to understand what a policy covers and doesn’t cover.

Typically, Builder’s Risk Insurance covers damage from the following:

• fire
• wind
• theft
• lighting
• hail
• vandalism
• vehicles/aircraft
• explosions

Typically, Builder’s Risk Insurance does not cover damage resulting from faulty design, planning, workmanship, and materials. Professional Liability insurance usually covers that type of damage.

Plus, Builder’s Risk Insurance usually doesn’t cover workplace injuries or liability. Other standard exclusions include the following:

• employee theft
• water damage
• weather damage to property in the open
• earthquake
• war
• government action
• mechanical breakdown

What Is the Cost of Builder’s Risk Insurance?

The limit of the policy should reflect the total completed value of the project – including materials, labor, and overhead but excluding land cost. You can also insure a percentage of the building profit.

Typically, the best way to determine the best amount of coverage is to look at the construction budget. If changes result in an increase in the value of the structure, you should contact your insurance provider, so the policy can be endorsed to reflect the new value.

The cost generally runs between one and four percent of total construction costs.

How Do You Purchase Builder’s Risk Insurance?

Every construction project has a lot of moving parts, and each project is different. Your first step should be to find an agent with experience in contractor’s insurance like the agents at American Insuring Group.

Here is the basic information you should be ready to provide your agent:

• Insured name and mailing address
• Builder information – name, years of experience, number of structures built or remodeled in the last year and the projected number of projects for the next year, and loss history
• Property information – address, square footage, number of stories, total completed value, type of construction material, and fire protection class

Here’s How to Get the Best Price on Builder’s Insurance

If you want to ensure the proper coverage, limits, and policy type are in place for your next project, give American Insuring Group a call at (800) 947-1270 or (610) 775-3848 or connect with us online. Not only do we specialize in contractors insurance, but we are also independent agents, which means we thoroughly check e and compare pricing and coverage with multiple companies to ensure that you get the best price and quality protection!

Risk management is part of any successful business, and it is especially true in an industry fraught with as many dangers as construction. Accidents that cause injury, damage, or death occur on worksites across the country every day.

Preventing those injuries is your first line of defense. That might include actions like creating and enforcing a safety management program, providing proper safety training, offering protective gear when appropriate, etc.

Contractor Insurance is Key to Managing Risk

Unfortunately, accidents can still occur. That’s where contractor's insurance comes in. The right coverage will protect your employees, your customers, and your business.

You probably know all this, but what happens when a subcontractor that you’ve hired is injured or causes an injury or damage? Hiring subcontractors is a prevalent practice in the construction industry because the more people you have working on a job, the more you can get done, right?

We think it’s pretty safe to say that’s true, but subcontractors also add another level of risk, which makes it essential to understand the role contractor insurance plays with subcontractors. Here’s some info that may help.

Subcontractor Risk Considerations 

#1 - Employee vs. Subcontractor

With an employee, you are required to pay Social Security and Medicare taxes, pay unemployment tax on wages, provide workers’ compensation in many cases, etc. The headaches and expenses of an employee can quickly add up.

But with subcontractors, you don’t have to pay the same taxes or provide WC insurance. Therefore, some contractors misclassify employees as subcontractors. Sometimes it’s even done by mistake because there are so many variables that determine whether or not someone is an employee.

Even the IRS admits there is no simple formula to determine if a worker is an employee or an independent contractor, and factors which are relevant in one situation may not be applicable in another. “The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination,” according to the IRS

Misclassifying an employee as a subcontractor can end up costing you more in fines and penalties than you would have paid if they were classified correctly. This makes it imperative that you make the right classifications. Here are some tips to do that.

Determine the Business Relationship 

First, you need to determine the business relationship that exists between you and the person performing the services including your degree of control over them and their independence. The IRS provides these three categories to provide evidence of that control or independence. 

• Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
• Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how the worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
• Type of Relationship: Are there written contracts or employee type benefits (e., pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

#2 - Get Subcontractor Insurance

If you have determined that you are dealing with a subcontractor and not an employee, you do not need to worry about workers’ compensation insurance; however, you still face risks. Don’t assume that your contractor’s liability insurance will cover you in the event that a subcontractor’s work causes damage or injury. Damages caused by individuals other than your employees are excluded in many general liability policies.

Your first step is to make sure that all of your subcontractors have their own general liability coverage that is adequate to cover any injuries or damage. Have them to provide a certificate of insurance as proof. The International Risk Management Institute (IRMI) suggests the following minimum general liability insurance limits for subcontractors:

• $1,000,000 each occurrence (the combined single limit for bodily injury and property damage);
• $1,000,000 for personal and advertising injury liability;
• $1,000,000 aggregate on products and completed operations;
• $2,000,000 general aggregate.

#3 - Get Listed as an Additional Insured 

You should also make sure that your subcontractors include you as an additional insured on their commercial insurance policy to protect you against their negligence.

Be Prepared - Contact Us Today! 

Accidents happen, but the right insurance will help protect your business. For more information about contractor insurance and any time of business insurance you may need, contact American Insuring Group at (800) 947-1270 or (610) 775-3848 or contact us online.

You can rest assured that we'll find you affordable contractor insurance at a great price because our independent agents are free to scour the market and to compare policies among lots of competing providers.

Having a freshly constructed building for your business is exciting. It’s the culmination of an undertaking that involved the acquisition of land, working with an architect, hiring a construction company, and picking out the furnishings. After you have completed the project, you will have added a significant investment that you will undoubtedly protect with a well-designed insurance program.

But what about the risks that the project will be exposed to while construction is underway? Many of the risks to your finished building--fire, theft, vandalism, and other hazards--are the same threats that can haunt the construction phase of the project. Damage to work that’s in progress or to the construction equipment, for instance, can make it impossible to stay within budget or to remain on schedule.

Builder’s risk insurance provides valuable protection

Builder’s risk insurance, a form of contractors insurance, offers specialized coverage that protects your insurable interests in the construction or renovation of a building or structure if those items should sustain physical loss or damage from a covered cause.

But the term “builder” can be misleading since insureds can include the ultimate owner or a lending institution in addition to the contractor who is doing the construction work.

Understand your policy’s provisions

The various options available under builder’s risk coverage depend on the policy’s provisions. These provisions will include the causes of any loss and risks against which you are being insured. The wording should be studied before the construction contract is signed to avoid any coverage problems during construction.

Many builder’s risk policies take a broad approach to the property to be covered, indicating that the coverage applies to all property intended to become a permanent part of the construction, installation or erection of the project. Other policies may refer to covered property as “buildings or structures in the course of construction, erection or fabrication.” If this is the policy’s wording, you need to remember that although a building is a structure, not all structures are buildings. Since a building is usually considered to be an occupied structure, if the construction project involves a structure, identify it as such, and confirm the insurer writes the provisions of the policy with the structure in mind. 

Know which losses are covered by your builder's risk insurance

It’s common for a builder’s risk policy to provide coverage for certain items. The list includes:

• Scaffolding
• Temporary structures
• Construction forms
• Cribbing

Some insurers cover these automatically, and some will subject them to a limit. Others may require you to add their values to the policy limit. In most cases, the contractor’s equipment—ditch diggers, bulldozers, etc.--is not covered. For these items, an equipment floater is recommended.

Know which risks are not insured

Insurance companies write most policies on an all-perils basis. In other words, coverage applies to physical loss or damage from any cause of loss, unless the loss is limited or results from an explicitly excluded peril. The “non-fortuitous” loss is excluded even though it might not be expressly stated. This is a loss that is expected to happen or has been caused intentionally. It is not accidental and therefore not a loss that will likely be covered by insurance.

Commonly excluded are losses brought about by the following:

• Ordinance or law
• Nuclear hazard
• Earth movement
• Flood
• Civil authority
• Contamination

Also generally excluded are losses from criminal, fraudulent, dishonest or illegal acts; mechanical breakdown; loss of use and consequential losses; wear and tear; pollution and steam boiler explosion, which can be covered by a separate breakdown policy.

Keep in mind that you must tailor builder’s risk insurance coverage to the specific risks associated with your project and to the expectations of all project stakeholders.

Get the Right Builder's Risk Insurance Policy

We can help you create a policy that meets the needs of your construction project. As independent insurance agents, we're free to shop among competing providers to help you obtain the best insurance solution at the right price.

To learn more about builder’s risk insurance, contact American Insuring Group online or call us at (800) 947-1270 or (610) 775-3848.