Builders risk insurance protects an organization or an individual from property losses and damages incurred during the construction or renovation of a structure or building. Simple enough, right? Well, not always.
Who Should Buy It?
Typically, the purchaser of such a policy is the general contractor and/or home or business owner. Sometimes a policy purchased by the contractor will include coverage for the property owner, sometimes not. Sometimes a homeowner’s property insurance will cover the risks, sometimes not. Sub-contractors usually will not be covered by the general contractor’s policy. Important takeaway here: Read the fine print.
What Does It Cover?
Policies vary depending on the insurer. Most standard builders risk insurance covers the following:
- Theft and vandalism
- Lightning and hail
- Windstorms (may be limited by area)
What Isn’t Covered?
As with most insurance, it is often possible to add coverage. That said, here are the standard exclusions:
- Injury or accident liability
- Flood or Earthquake
- Employee theft
- Government actions
- Faulty materials, design or workmanship
- Contract penalties
- Equipment malfunction
How Much and How Long?
Depending on the coverage, expect to pay 1 to 4 percent of the total competed value of the structure (not including the land) plus any labor costs. Policies usually are structured to run for periods of up to 12 months. Extensions are possible but are typically only granted once.
Builders risk insurance is often mandated by local or state code and under terms of the contract. Do your homework beforehand to simplify the process.