Builder’s Risk Insurance

What is it and why do we need it?  Builder’s risk insurance is used to cover new construction or renovation work on existing structures.  Note that this insurance only covers the renovation work and not the existing structure itself.  

A typical policy provides coverage on a property that will become a permanent addition to a structure.  This insurance also provides coverage on supplies included in the contract while they’re in transit to the job or being stored at a different location.

Of course, there are exceptions to the coverage.  A normal builder’s risk policy won’t include coverage for flood, earthquake, equipment problems or testing of HVAC or electrical systems.  These items can always be added to the policy for an additional cost.

Equipment that won’t be a part of the structure being built such as tools, etc., are not covered.  Other structural equipment such as scaffolding or temporary structures can be covered.

What party is responsible for builder’s risk insurance?

Owners and contractors are both responsible to purchase builder’s risk coverage.  The value of the coverage should be the construction cost that includes labor and profit.

Why have it?

Like every other type of insurance, the builder’s risk insurance is meant to protect the parties opting in. In this case, the owner, contractors and subcontractors are the ones being protected.  Having this type of insurance eliminates the question of who’s at fault if something were to happen.  It’s always better to be safe than sorry.

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