Builders risk primarily insures a structure while under construction. A builders risk policy also most often includes additional coverages besides just covering structures. Coverage protects a person’s or organization’s insurable interest in materials, fixtures and/or equipment to be installed during the construction or renovation of a building or structure should those items sustain physical loss or damage from a covered cause. The policy is often required to comply with government regulations or as a condition to meet banking or other contractual arrangements. A standalone builders risk policy does not provide coverage for workplace accidents and injuries or liability coverage
Demand for a builders risk policy is often time sensitive. Most purchases occur prior to or on the date of construction when the contract is finalized. In some cases, you might begin construction without securing builders risk coverage. Whatever the case might be, a builders risk policy can be issued before or even during a project. However, there is usually a threshold of 30%; if the project is over 30% complete your options will become limited as most insurance companies won’t offer a quote once a project is 30% or more completed.
Given the broad scope of potential clients, the term can be misleading. Depending on the terms of the construction contract, the contractor or project owner will be required to purchase builders risk coverage. A builders risk policy can be purchased in the name of the owner or builder. Contractors and other parties of interest may also be protected under an additional named insured clause. Whenever someone is listed as an additional insured, be sure a waiver to subrogate is clearly outlined in the construction contract or agreement. This will protect the interest of additional named insureds should property damages occur during construction.
Types of Coverage
Besides just covering structures, most builders risk policies can be setup to include many additional coverages. The most common of these additional coverages include:
- Back-up or overflow of sewer, drains or sumps– coverage for water that backed up from a sewer, drain or sump.
- Debris removal– provides coverage for expenses incurred from removing debris that occurred from a covered loss.
- Existing building or structures– for those that are working on a building or structure that has already been built; this coverage extends to the pre-existing building or structure itself. This is a common coverage need for those performing rehab work, remodeling work, renovation work etc.
- Fire department service charge– provides coverage for expenses incurred from having to call the fire department to help save and/or protect covered property.
- Demolition cost– covers the cost to demolish and remove debris in matters where a portion of a covered building is damaged.
- Increased cost of construction– covers the cost necessary to repair or reconstruct damaged portions of a covered building.
- Pollution clean up and removal– covers expenses to extract pollutants from land or water, but only if it happened from a covered loss. Examples of pollution clean up claims include discharge, dispersal, & seepage.
- Reward– if information on a loss results in a conviction, this coverage will pay the person who provided the information. Example- an arsonist setting a fire was caught on camera and the person who took the video turned in the information to police.
- Scaffolding, construction forms and temporary structures– in addition to the structure itself, coverage also extends to attached scaffolding and temporary structures. Any expenses to re-erect scaffoldings and temporary structures is also usually included in the coverage as well.
- Property at a temporary storage location– covers designated construction supplies and other related material while away from the construction property.
- Property in transit– covers designated construction supplies and other related materials while in transit to/from a construction property.
- Valuable papers and records– covers expenses reproducing records including labor. If there is no copy of the paper/record, this coverage also covers the necessary expenses incurred to research, replace, reproduce or restore the lost information.