3 Things to Know About Builder’s Risk Insurance

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Builder’s risk insurance policies may not be something you write very often at your agency, but it is important to know some of the key factors at play with this type of coverage. Unlike traditional property insurance policies that cover an already constructed building, builder’s risk insurance covers a building or area currently under construction.

Since the insured area or structure has yet to be completed, there are a few specifics to remember about these policies. Builder’s risk policies can vary from carrier to carrier and from builder to builder, so be sure you know the following basics when it comes to determining the right coverage options for each situation.

What does a builder’s risk policy cover?

Typically, a builder’s risk insurance policy will cover damages up to a predetermined coverage limit, which is based on the total value of the structure being built. This includes materials used to build the structure and the labor costs, but does not include the value of the land beneath the structure.

Damages to these structures can be caused by a variety of events, such as fire, wind, theft, lightning and vandalism among others. Should these situations occur, the construction may be covered under a builder’s risk policy. It’s also important to remember, however, that builder’s risk policies can cover property not attached to the building or structure being constructed. This can include fixtures, materials, machinery and equipment, such as:

  • HVAC or electrical systems
  • Temporary structures
  • Sidewalks and pavement
  • Office trailers
  • On-site materials

Aside from property coverages, the parties involved in the construction should also be listed as named insureds. Project owners, general contractors and any subcontractors are all examples of parties that should be insured under this type of policy.

What is not covered under a builder’s risk policy?

Builder’s risk policies typically exclude a few key situations and structures. Catastrophes like earthquakes, floods and landslides are not covered under a builder’s risk policy. In most circumstances, builder’s risk policies also do not cover fences, signs, swimming pools, docks, bridges and landscaping. Generally, structures placed underground are excluded from coverage, such as foundations, pipes and drains.

Are extensions available for builder’s risk policies?

Depending on the builder’s specific concerns for certain types of risks, endorsements or “riders” can be added for an additional price, although they may be limited. Since every builder’s projects are unique, these extensions can vary greatly. Some common examples include coverage for transporting property to the jobsite, scaffolding, water damage from sewage backup and valuable documents like blueprints and site plans.