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Builder’s Risk Insurance is a type of property insurance that essentially protects a building while under construction or renovation. Depending on the policy, it may cover just the structure, or it may include materials, fixtures and/or equipment used in the construction process. While builder’s risk insurance is typically requested by the owner of the building, it protects both the owner and contractors from major loss.
A builder’s risk insurance policy typically ranges from one to four percent of the cost of construction, depending on the level of coverage required for the project. It’s important to partner with an insurance carrier that offers broad terms at competitive pricing and can provide coverage that protects both contractors and developers from property losses and other financial costs associated with the resulting delays in construction following a loss.
Who Needs Builder’s Risk Insurance?
There are a wide variety of potential clients who buy builder’s risk insurance. “Owners and contractors” can describe a myriad of different types of clients beyond the scope of just a homeowner and a construction company. Potential builder’s risk insurance clients can also include:
- A development company building a new apartment, condo or townhome complex
- A business with costly equipment that is undergoing a major remodel
- A government agency constructing a new facility
- A school district building or remodeling a school site
The above are just a few examples of who might have the policy. In fact, any entity that is undergoing a remodel or construction project that may leave them with vulnerable assets can benefit from builder’s risk insurance.
What Does Builder’s Risk Insurance Cover?
Builder’s risk insurance covers a wide variety of events. Most policies include the following types of events:
- Fire or explosion
- Theft or vandalism
- Lightning and hail
- Wind (some coastal areas may require additional coverage)
- Vehicle or aircraft accidents
- Loss of or damage to materials while in transit or at temporary locations
- Losses due to ordinances or laws
- Delay-driven penalties assessed by lenders or extra taxes
Unlike other property insurance policies, a builder’s risk policy is meant to terminate when construction has been completed and the property is ready for occupancy or commercial use. A standard builder’s risk insurance policy has a term of 12 months on new construction projects, and terms of six, nine or 12 months on remodeling or renovation projects. Extensions can be provided in certain situations, depending on the policy.
What Does Builder’s Risk Insurance Exclude?
Like all insurance policies, builder’s insurance comes with exclusions. Typical exclusions include but are not limited to:
- Workplace accidents and injuries
- Employee dishonesty or illegal acts
- Mechanical breakdown
- Design error or faulty workmanship
- Loss of use or other consequential losses
While builder’s risk insurance is a very specific type of insurance, it is a valuable asset for homeowners and business owners that allows them to protect their investments and avoid potentially costly losses that would otherwise not be covered under their homeowners’ or business owners’ policies.
About Mavon Insurance
At Mavon Insurance, we pride ourselves on our unique approach to insurance. We focus on integrity, communication, professionalism, respect and gratitude to help our clients succeed and place business in specialized markets. For more information about our products, or to become an agent, contact us today at (877) 426-2866.