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Builder’s Risk Insurance

Builder’s Risk Insurance

Builder’s Risk Insurance is a special type of property insurance which indemnifies against damage to buildings and materials while under construction.   Builders risk covers perils such as fire, wind, theft and vandalism.  Coverage is typically during the construction period only, and is intended to terminate when the work has been completed and the property is ready for use or occupancy.  Builders Risk premiums are typically more expensive than homeowners insurance, because there is much more of an exposure to the elements and more threat of loss.  Once the home is completed the new owner will take out permanent property insurance on the building such as a Homeowner’s policy.

What is the coverage under Builder’s Risk policies?

Builder’s risk covers perils such as fire, wind, theft and vandalism and many more. It typically does not cover perils such as earthquake, flood, or wind in coastal zones unless the policy has been specifically endorsed to do so. Builders Risk coverage should be effective prior to when the materials are delivered to the job site. Coverage ends upon the earlier of closing of the sale, occupancy or the policy expiration date.

Are there alternatives to Builder’s Risk Insurance?

If the project involves renovations or additions to an existing building, the owner’s existing property insurance may cover the work under construction providing a builder’s risk or “course of construction” endorsement has been added to the policy. (Insurance company requirements and acceptability vary.) However, in the case of new buildings under construction on vacant sites, the owner may not have an existing policy that provides coverage.

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