Builders Risk Coverage Explained

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What Is Builders Risk Insurance?

Builders Risk Insurance—also referred to as Course of Construction (COC) Insurance or improperly termed as building risk insurance or builder risk insurance—is a specialized type of property insurance that protects a person's or organization's construction projects, renovation, or installation. It can include materials as well as equipment being used in the construction of a building or structure should those items sustain physical damage from a covered cause. This type of policy also typically covers lost or stolen items.

A builders risk policy is typically effective from the moment the project commences until it is completed. Coverage is typically for the construction phase only and will terminate when the project is completed and ready for use or occupancy. While normally purchased by the owner of the project, insured’s can also be lending institutions or the contractor or contractors that are performing the work. 

Who Needs A Builders Risk Policy?

A builders risk policy can be useful in a variety of circumstances. If you are any person or organization who has a vested interest in the project being completed, you need to consider investing in this risk coverage. This can include but isn't limited to:

  • Homeowners completing a renovation project
  • Builders/Contractors completing the project
  • House flippers
  • Development or investment companies
  • Retail companies
  • Architects or Engineers

What Does Builders Risk Insurance Cover? 

As buildings are being constructed, builders risk insurance covers:

  • Explosions or Fire
  • Damaging Winds or Hail
  • Lightning Strikes
  • Theft or Vandalism
  • Vehicle or Aircraft Accidents

If a delay arises in a construction project due to a covered loss, this builder insurance can potentially mitigate the financial impact and soft costs incurred from taxes, interest on loans, lost sales, or lost rental income.

What Is Excluded From Coverage?

A builders risk insurance policy typically excludes:

  • Earthquakes
  • Floods/Water Damage
  • Acts of War or Government Action
  • Intentional Acts
  • Employee Theft
  • Faulty Design or Workmanship
  • Contractual Penalties
  • Mechanical Breakdown

While this type of policy typically covers 'Acts of God', if you have materials that are considered unprotected from the elements, they may be excluded. So it is imperative to do everything in your power to protect materials and equipment being used on the property in question.

What Types of Property Does It Cover?

Builders risk coverage can include swimming pools, retaining walls, storage buildings, garages, additions being made to a building/home and the structure being built. It may also include tools and other materials which are kept on site. Materials in transit may also be covered in the policy. However, heavy equipment and machinery are not normally covered and may require a separate rider or extension. An extension is often purchased to cover items such as scaffolding, debris removal, temporary structures, damage incurred by a sewer backup or water damage, or things such as asbestos removal.

Other Insurance Policies You May Need

There are some policies you may need to purchase concurrently with builders risk insurance:

General Contractor Liability Insurance: This is a policy that protects you in the event of injury or damage to a third-party during the course of construction. Many government entities require a certificate of insurance to prove coverage before bidding on a job. In short, general liability typically covers:

  • Customer bodily injury
  • Property damage
  • Libel and slander

Construction liability: This can protect you if you are sued, if property damage is incurred, or if there is a personal injury to a third party. It can also cover legal fees or settlements. If you own and operate a construction business or are working on construction projects, this is a necessity.

Inland marine insurance policy: An inland marine insurance policy covers your tools, equipment, and other cargo while in transit to/from a job site. Your business property is not covered by commercial auto insurance coverage.

Commercial Property Insurance: If you are a property owner or own property that your business is located in, consider this coverage to protect your buildings and property within.

What Is the Typical Cost of Builders Risk Insurance?

We're often asked how the cost of the coverage is typically calculated. The rate is typically calculated as a percentage of the total cost of the construction project (anywhere from 1-4%). Average ranges can be expected from $200 a month to $2,000 a month, depending on the size of the project.

A quote from an insurance company typically takes into consideration the type of the project, where it's located, materials being used, and optional coverages that you want added onto the base policy. To get a more accurate quote, speak with an agent who is familiar with this type of insurance.

Get A Builders Risk Insurance Policy Quote

If you're a contractor—or anyone directly invested in a construction project—you should speak with a licensed agent who specializes in builders risk policies. For large or specialized projects, it is also important to have an attorney review the contract and requirements for the builders risk insurance coverage. You can complete the form at the top of the page to get a free builders risk quote, or give us a call at 1-877-907-5267 to speak directly with an agent.

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