Whether you’re building a new football stadium or a tiny storage shed, every construction project faces the same kinds of problems that can suspend operations. Finishing on time and under budget will keep you and your clients satisfied. Having the proper coverage every step of the way helps get the job done right.
It's important to get equipped with the right builders risk insurance before a project ever begins, and an independent insurance agent can help. Your builders risk insurance will be simple and easy to obtain with the help of a local trusted advisor, and will aid in the success of your project.
What Is Builders Risk Insurance?
Builders risk insurance is a special form of property insurance designed to protect construction projects in progress. Coverage will reimburse to repair, replace or recover the current value of a construction project. This includes coverage for various common disasters such as fires, theft, labor costs and storms.
As a builder or building owner, having the proper builders risk policy in place could save your project (and you) thousands of dollars in expenses. Enlisting the help of an independent insurance agent that is experienced in the different types of builders risk policies is key to a project staying on track.
Builders risk coverage protects construction projects against the following perils:
Builders risk insurance allows projects to be completed by their original deadline, and construction workers to have peace of mind knowing their materials are protected.
Who Sells Builders Risk Insurance?
|Builders Risk Insurance Companies
When it comes to builders risk insurance, one carrier outshines the rest:
- Best builders risk insurance company: The Hartford
The Hartford offers competitive rates on its builders risk coverage for customers. The carrier has an extensive history of working with construction businesses and contractors, and knows how to tailor coverage to meet their needs. The company offers flexible coverage options for construction businesses of all sizes. The Hartford also prides itself on outstanding customer service, including when it comes to handling claims. The insurance company provides professional consultation services with construction businesses to aid them in carrying out safe operations.
Types of Builders Risk insurance
Now that you have a brief overview of what builders risk insurance is designed to protect against, it's time for a larger breakdown of the many types of coverage commonly offered by this product:
- Equipment breakdown: Protects property and equipment from mechanical breakdowns, as well as the explosion of steam boilers, and more.
- Ordinance or law: Protects against increased rebuilding costs due to ordinances or laws that regulate construction of damaged structures due to covered losses.
- Identity restoration: Protects against identity theft of the business owner.
- Building coverage: Protects the building under construction, and structures already completed for the project. Swimming pools, storage buildings, fences, retaining walls, and more are covered. Personal property used to maintain these areas is also covered.
- Commercial general liability (CGL): Protects builders against lawsuits filed by third parties for claims of bodily injury or property damage, or advertising injury. CGL insurance is not always included in builders risk policies, so make sure to ask your independent insurance agent about getting coverage that provides this highly important protection.
- Personal liability: Some builders risk policies will have a limit on personal liability so that you're covered if someone's hurt on the premises while the project is being built.
- Theft and vandalism: Covers repairs or replacements to your building materials, etc., if it gets damaged or stolen by vandalism or theft.
- Building materials coverage: Covers on-site materials that are damaged or destroyed.
- Materials in transit: Covers your structural materials while they're being transported to and from the worksite.
- Coverage for perils: Protects your project from perils and natural disasters like fire, wind, hail, and more.
An independent insurance agent can further explain the types of builders risk coverage and help you determine which options make the most sense for your needs.
Who Needs Builders Risk Coverage?
Many types of professional builders need builders risk coverage. Basically anyone that has a financial interest in a construction project requires this coverage, including:
- Property owners
- General contractors
The party typically responsible for carrying builders risk insurance would be either the project's owner or the general contractor hired to build. Deciding whose job it is will depend on who is fronting the money for the labor and materials. Often the general contractor is purchasing the material and labor. Then, when the transaction goes through officially, that's when the general contractor will be paid. In this scenario, the general contractor would take out the builders risk policy.
There are other cases where you would purchase all the materials and pay for the labor, either in part or in total, and in that scenario, it would be your responsibility to obtain the builders risk policy. Remember that you can't insure what you don't own. That means the responsibility for the policy falls on the actual owner of the items, structures, or materials. When the owner changes, then the new owner obtains the policy, and the old owner cancels theirs.
An independent insurance agent can help you determine which members of your team need to be protected by a builders risk insurance policy.
Save on Builders Risk Insurance
Our independent agents shop around to find you the best coverage.
What Types of Property Does Builders Risk Insurance Cover?
While basic builders risk insurance covers structures still under construction, that's not all it's used for. Builders risk coverage can also protect:
- Equipment on site
- Equipment in transit
- Equipment stored at other locations
- Materials and supplies
Builders risk insurance is designed to protect many types of property, from materials and equipment to projects under construction.
What Does Builders Risk Insurance Cover?
A builders risk insurance policy protects a construction project and almost everything that’s part of the process, including the actual structure and even building site necessities such as porta-potties. The biggest difference between policies is what hazards they protect against, such as fires, explosions and falling objects.
Builders risk insurance policies will fall into three different forms of coverage: basic, broad, and special. Here's an overview of each:
- Basic: Protects against fire, lightning, wind, explosions and more.
- Broad: Protects against everything included in basic, as well as several additions like falling objects, water damage, and a few more.
- Special: Protects against theft and everything else.
Coverage extensions can be added to your policy to guard the following:
- Temporary structures
- Debris removal
- Pollutant cleanup
- Construction forms
An independent insurance agent can provide even more information about the important coverage provided by builders risk insurance, and help you learn how these critical policies can work for you.
Builders Risk Insurance Exclusions
Builders risk provides a load of important protection for builders, but it can't cover everything. Common coverage exclusions are:
- Wear and tear
- Acts of terrorism and war
- Employee theft
- Rust and corrosion
- Mechanical breakdowns
- Damage due to faulty design
- Workmanship and materials
- Employee dishonesty
- General wear and tear of equipment, etc.
- Loss/destruction of most equipment/tools
- Routine maintenance fees
- Earthquake damage
- Power failure (unless it causes damage to computer systems)
- Temperature/humidity changes
- Flood damage
Another category not covered under many builders risk policies is what’s known as “soft costs,” or things that cost the general contractor, etc. more money because there was a loss during the project. If a project gets prolonged due to an error and the contractor has to extend a line of credit, or if a building owner has to find new tenants if someone breaks a lease, special endorsements to cover soft costs can be added to your policy.
When to Get a Builders Risk Policy
Depending on how complex the build-out is, you'll typically want to obtain a builders risk policy 15 to 30 days prior to the project breaking ground. Make sure you have all the coverage in case the project starts early. You certainly don't want to forget the builders risk policy until the project is more than 50% completed.
Once the project hits a certain level of completion, insurance companies no longer will take on the risk of the project. That's because they would be responsible for any prior claims that occurred at the beginning of the build-out, and that's just not worth it for them.
Builders Risk Insurance for Homeowners
If you’re building a new home or remodeling an old one, builders risk insurance is important to protect all parties involved. Often your lender will require proof of builders risk insurance before a project begins. Otherwise, the homeowner should request this of their builder up front.
Having a builders risk policy in place for your home building project acts in two important ways:
- Ensures that none of the potential claims that arise during a build-out will be your responsibility.
- Protects the builder from having to pay out of pocket for any claims.
Contact your independent insurance agent to review the finer details of your builders risk policy before you begin work on any important construction projects.
Builders Risk Insurance Benefits
Builders risk insurance provides many important protections for several different kinds of workers. Some of the main benefits builders risk insurance is designed to offer include:
- Protecting structures in progress
- Safeguarding construction materials
- Fulfilling client requirements
- Covering unique risks of working on someone else's property
As always, an independent insurance agent can further explain these major benefits of builders risk coverage, and inform you of many more.
How Long Does Builders Risk Insurance Last?
On average, a policy will last 3, 6, 9, or 12 months. Builders risk policies can usually be extended at least once if the building is not completed by the time the term is up, however. Coverage can continue for up to 90 days after completion, or until ownership is transferred from the general contractor or the building is occupied.
What If Your Builders Risk Policy Is Up?
Keep track of how long your policy is in force. Maybe your general contractor said they'd be finished in six months, and now they're predicting eight months. It's likely that your builders risk policy has the option to extend coverage for more months until the project is complete.
Make sure your policy comes with this option at the time of purchase. If you end up 50% complete in the build-out process and now have a builders risk policy that's termed out and can't extend coverage, you could be self-insuring and crossing your fingers that nothing happens during the remaining months.
Cost of Builders Risk Insurance
The cost of a builders risk policy depends on a number of factors, with the biggest one being the final value of the completed project. It's typically less expensive than your primary homeowners insurance policy, but it can be comparable in price. If you're getting what's called a "bare-bones" builders risk policy, meaning you're accounting for everything except the personal liability, these policies typically range from $500 to $1,000. This should only be an option if your primary homeowners insurance policy can extend personal liability to the worksite during the build-out. A lot of homeowners policies will do so, and save you a little money in the building process.
Your builders risk insurance premiums can vary. Coverage for a three-bedroom house might only be $500-$1,000 per year, while coverage for a new football stadium would be much higher, perhaps even up into the hundred thousands.
The location of the construction project also factors into the cost of builders risk coverage. Property owners and contractors located near a coast might pay a lot more for coverage than they would in other areas, due to the increased risk of weather-related perils like hurricanes and flooding. Construction projects in major cities might come with premiums up to 20% higher than in other areas, due to increased threats of crimes like theft.
|Cost of Builders Risk Insurance for Small Businesses
|More than $2,000 annually
|Between $1,000-$2,000 annually
|Less than $1,000 annually
Some common factors influencing the cost of builders risk insurance include:
- Construction materials used for the project
- The type of construction project
- Your specific policy's deductible
- Your specific policy's coverage limits
An independent insurance agent can help you find more specific information about exact costs of policies in your area.
Finding Discounts and Savings on Builders Risk Insurance
Though builders risk insurance costs will be different from policy to policy, many insurance companies offer competitive discounts and other ways to save money on their coverage. Even better, independent insurance agents are especially skilled in finding money-saving hacks for builders risk insurance customers.
Here are some common discounts offered on builders risk insurance policies:
- Annual premium discount: You may qualify for a discount on builders risk insurance if you choose to pay premiums annually vs. in monthly installments.
- Bundling discount: You may also qualify for discounts on builders risk insurance if you purchase additional policies through the same insurance company.
- Loyalty discount: You may be eligible for discounts on your builders risk coverage if you remain with the same insurance company for a specific length of time.
- Safe practices discount: You might qualify for discounts on builders risk coverage if you take additional measures to guard your equipment and tools while in transit or not in use.
- Higher deductible discount: You can often save money on builders risk insurance if you choose a policy with a higher deductible amount up front.
An independent insurance agent can not only help you find all the builders risk coverage you need to get the job done safely, but also find the most affordable rates by browsing a number of different insurance companies’ builders risk insurance products.
Comparing Builders Risk Insurance Plans and Quotes
Connecting with an independent insurance agent in your area is the most efficient way to compare coverage and quotes. Evaluating a number of different builders risk policies to find the right coverage for your building project is their job. Independent insurance agents will compare policies and quotes from multiple insurance companies to make sure you find the right protection at the most affordable rate.
Mishaps and Scenarios to Think about for Builders Risk Insurance
When shopping for builders risk insurance, it’s a good idea to consider common construction project mishaps that could require this coverage. Then you'll be better suited to prepare for these mishaps in advance. Here are just a few common scenarios to keep in mind when browsing builders risk insurance options:
- Your business gets sued when someone trips over a piece of equipment: Third-party injuries and property damage can certainly be a risk factor on construction sites. If someone sues your business over one of these mishaps, it's imperative to be covered by adequate commercial liability insurance.
- Your equipment gets stolen while your team is resting: If your team's special equipment or tools get stolen, builders risk insurance will cover the replacement value of the items.
- Your construction project gets destroyed by a tornado when it's half finished: If a tornado or other disaster wipes out your structure that's still under construction, builders risk coverage will reimburse for half of the value the property would have when complete, if the project was half finished. The amount of reimbursement will correspond to the percentage of the project that's already completed when a claim is filed.
An independent insurance agent can further discuss common mishaps and scenarios to consider while searching for the right builders risk insurance. They’ll help your business anticipate and prepare for the worst by selecting the best available coverage for your needs.
Frequently Asked Questions about Builders Risk Insurance
The act of building anything always comes with a host of risks that could delay or derail a project. Having the right builders risk insurance can keep the build-out process moving, so you can finish construction without having financial hardships or time delays. A local independent insurance agent will be able to advise on the correct builders risk policy for your specifications, helping to ensure efficiency and completion of your project.
The specific kind of builders risk insurance you need will depend on your specific projects, job title, what specifically you need the coverage to protect, and a few other factors. The best way to get set up with the type of builders risk coverage you need is to work with an independent insurance agent. They'll ask you several questions about your line of work and current and future projects in order to determine which exact coverages work best for you.
Most of the time, financing is involved in a building project, and most lenders require a builders risk policy to be in place prior to any work being performed. However, there is an off chance that the project will be fully funded by the builder or the building owner, so no proof of builders risk insurance would be required. However, having builders risk coverage as part of your business practice is a wise decision no matter what.
While many types of professionals, such as contractors and construction workers, require builders risk policies in order to legally work, homeowners need this protection only at specific times. An individual who has a home under construction will want a builders risk policy to extend the coverage provided by their homeowners policy. Homeowners insurance does not cover construction projects in progress. Builders risk covers theft and destruction of building materials as well as property while in transit and in storage. Property belonging to contractors and suppliers is also covered under builders risk insurance, but not homeowners insurance. Builders risk policies also provide coverage for certain natural and other disasters that homeowners insurance doesn't. Flood, earthquake, and sewer backup damage or destruction to property or building materials could be covered under a builders risk policy, but not a homeowners policy. Homeowners also find the available coverage terms provided by builders risk insurance attractive. Typically, builders risk policies can be bought in increments of 6, 9, or 12 months. This allows homeowners to just purchase coverage for the length of their construction project, rather than having to keep paying for a policy they no longer need down the road.
Your builders risk policy may or may not include liability coverage. You'll need to double-check with your independent insurance agent to be sure. But general liability coverage is meant to protect against lawsuits filed by third parties for injuries or property damage, often sustained on your premises, whether that's your home or business. Builders risk insurance, on the other hand, is meant to protect property and materials while a construction project is underway. This coverage protects property belonging to the workers, as well as the building or structure they're working on.
The cost depends on the coverage needed and a number of other factors, such as the end value of the project. Since builders risk policies are short-term and end once the building project is complete, the cost can be pretty minimal. So, the larger the project, the more expensive the policy will be. Speaking with your independent insurance agent is the best route when determining the cost of builders risk policies.
The Benefits of Working with an Independent Insurance Agent
Independent insurance agents have access to multiple insurance companies, ultimately finding you the best coverage, accessibility, and competitive pricing while working for you. And as your needs change, they'll be there to help you adjust your coverage, up or down, to make sure you're properly protected without overpaying.