What is Builder’s Risk Insurance?
Builder’s Risk Insurance, people also refer to it as Course of Construction, is some kind of property insurance. It's a form of insurance, which covers a building where the building is presently being constructed. It can cover just the structure, or also the materials on site waiting to be installed or transported to the job site.
The builder's risk insurance policy will pay for damages up to the coverage limit. The limit must accurately reflect the total completed value of the structure (all materials and labor costs, but not including land value). The construction budget is the best source for determining the appropriate limit of insurance.
Builder’s Risk insurance policies can often be written in terms of three-months, six-months, or 12-months. If the project is not completed by the end of the initial policy term, it can often be extended, but usually only one time.
What Does a Builder's Risk Covers?
The builders risk policy will provide coverage for damage done to the insured structure from a wide variety of events. Damage from the following events will be covered by most policies:
- Wind (may be limited in coastal areas)
You should read your course of builder's risk insurance policy to be familiar with its limitations and exclusions. Limited coverage is provided for collapse. Standard exclusions include:
- Employee theft
- Water damage
- Weather damage to property in the open
- Government action
- Contract penalty
- Voluntary parting
- Mechanical breakdown
An important exclusion which should be read in its entirety excludes coverage for damage resulting from faulty: design, planning, workmanship and materials. Earthquake and flood coverage may be purchased in some areas.
Extensions of coverage may be provided for certain situations. The coverage for these may be limited.
Common builder's risk insurancecoverage extensions include:
- Property in transit
- Property in temporary storage
- Fire department service charge
- Debris removal
- Sewer and Drain Backup
- Valuable papers (site plans, blueprints, etc)
A coverage extension to protect your property from loss while being transported to the jobsite.
Coverage is extended to apply to scaffolding, construction forms and temporary structures, but only while they are at a location you have reported.
Property that will be used or installed in the secured location and pertaining to the insured company.
When the fire department is called to save or protect covered property from a covered cause of loss.
The builder's risk insurance policy will pay your expenses to remove debris of covered property. This debris must result from a loss that is covered under this form.
Water damage from the back-up of sewers and drains is usually covered.
Some additional information that you should know:
- The insurance will not cover the property of others.
- Sub-contractors are required to have their own insurance.
- There is no coverage for tools or equipment.
- No coverage for liability.
- It does not cover accidents in the job site.
- Usually coverage ends when the building is completed, or occupied.
- The premium for the annual policy is fully earned.
For specific terms, coverage and exclusions, the original builder's risk insurance policy will determine the applicable coverage.