What Is Builders Risk Insurance?
Builders Risk Insurance—also referred to as 'Course of Construction (COC) Insurance'—is a specialized type of property insurance that protects a person's or organization's construction project(s), 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.
Builders Risk Insurance 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 Insurance 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 Builder's Risk Insurance Cover?
As buildings are being constructed, builder's risk insurance coverage may include:
- 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:
- 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 insurance policies you may need to purchase concurrently with a builders risk policy.
General Contractor Liability Insurance
General Contractor Liability Insurance is a policy that protects you in the event of injury or damage to a third-party; it’s a requirement from most entities when you enter into a contract. In short, general liability insurance typically covers:
- Customer bodily injury
- Property damage
- Libel and slander
Construction liability 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.
What Is The Typical Cost of Builder's 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 coverage.
Get A Builder’s Risk Insurance 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 of the builders risk insurance.
Your particular state's Department of Insurance can be a good resource as well. Whether you’re providing the coverage, or the owner is, it’s good to have a relationship with an insurance agent who can connect you with the right insurance company.