What Builder’s Risk Covers and What it Doesn’t

Let’s talk about what a Builder’s Risk Policy is for: Builder’s Risk Insurance covers buildings and structures under brand-new ground-up construction or minor remodeling of existing structures, such as interior remodels and ‘gut rehabs.’ Typically it covers the same types of things as regular property insurance, such as damage from theft, fire, vandalism, wind, hail, and other accidental loss or damage to the property. It also provides coverage for theft or damage to materials not yet installed, such as uninstalled windows, cabinetry, lumber etc.

There is no liability coverage and coverage usually extends until 90 days after the building or structure is completed and/or 60 days after it is put to its intended use.

Now let’s talk about what it isn’t used for: It is not intended to be used for long-term coverage or to be used for properties which are occupied during the course of construction (except minor remodeling work).  And finally, they are not intended for use on vacant or properties actively held for sale.

Who needs a Builder’s Risk policy? Those who have a financial interest in a major construction, remodeling, or repair project, including general contractors, real estate developers, and property owners. Certain trade associations and lending institutions may require Builder’s Risk Insurance, especially on projects worth a million dollars or more.

Keep in mind that Builder’s Risk policies do not cover damage arising from earthquakes or floods. This coverage will need to be purchased separately. One more thing to consider when purchasing Builder’s Risk Insurance; most policies do cover loss or damage to construction materials in transit and in storage. If you are planning on storing or transporting construction materials, this coverage should be provided in your policy. 

There are additional coverage’s you should be aware of: Contactors’ equipment and tools typically aren’t covered by the owner’s Builder’s Risk policy and these risks will usually require separate coverage.  However, one good side to this is that many policies do actually provide a limited amount – normally $5,000 – for tools and equipment stolen or vandalized. The down side is that they must be within 100 feet of the property at the time of the loss itself.  Builder’s Risk polices may or may not cover “soft costs” such as those associated with other aspects of a project: financing charges, marketing, legal, permitting, and loss of income resulting from property damage.

Contact Us today for more information about Builder’s Risk Policies – we have an experienced team that is here to work for you!

Source: Insurance Journal

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