Builders Risk Insurance 101 - What is it and Do I need this coverage for my project?

Builderss Risk Insurance Policy 101

While many may recognize the need for builders risk insurance, just as many are vague on details like what builders risk covers or who’s eligible for it. With decades of construction experience, we get this question all the time. Through our resource found at US Assure, we will do our best to provide the answers to some of those commonly asked questions.

Educational Video created by US Assure

What is builders risk insurance?

Builders risk insurance (also known as course of construction or inland marine coverage) is defined as insurance that protects a person's or organization's insurable interest in materials, fixtures and/or equipment awaiting installation (or after installation) during the construction or renovation of a building or structure, should those items sustain physical loss or damage from a covered loss.

However, the differences in covered exposures and policy types between providers (and even between those types of policies offered by a single provider) can make it difficult to determine precisely what you and your clients can expect from a builders risk insurance.

Who buys builders risk insurance?

There are several groups of eligible clients for a commercial or residential builders risk policy – all of which can purchase the policy in their name, including the following:

1. Homeowners/property owners

2. Builders

3. Contractors

4. House flippers

5. Development/investment companies

6. Retail companies

7. School districts

US Assure has a great project cheat sheet which will give you examples of the different types of course of construction projects agents insure. Policy features, benefits and terms remain the same, no matter who is identified as the insured. However, types of available policies vary by client type.

What projects under construction are eligible?

Builders risk policies (and the projects they cover) are typically available for ground-up new construction, remodeling (including or excluding the existing structure) and installation.

These projects are classified as either a residential or commercial risk. Bear in mind that the definition of those categories changes from provider to provider. The Builders Risk Plan insured by Zurich, for example, recognizes a residential project as structures from 1-to-4 family home (whether the work performed involves ground-up construction, renovation or installation). Commercial projects are far more varied, covering anything from office buildings to wind turbines to multimillion-dollar sports arenas.

And on that note, limits as to risk value vary by company. The Builders Risk plan insured by Zurich offers coverage for course of construction projects valued up to $75 million, for example.

What types of policies are available?

Builders risk policies are typically available for three varieties of construction: ground-up new construction, remodeling (including or excluding the existing structure) and installation. From there, builders risk policies types often vary between providers. Despite differences in terminology, most builders risk insurance is available in a few different varieties. Those policy types typically include the location-specific/single-project, reporting form, blanket policy and the blanket installation policy. The location-specific policy is very straightforward, while reporting form and blanket policies can be more complex, enabling clients to include multiple projects under the same policy.

What exposures does builders risk cover?

Builders risk is designed to protect construction sites from loss and damage. While exact coverages and limitations vary between providers, comprehensive builders risk policies may offer coverage for theft and vandalism, as well as additional coverages including (but not limited to) soft costs, flood, windstorm, earthquake, ordinance and law, and business income and extra expense. Policies may also cover damage to construction material, temporary structures, fencing, scaffolding, subdivision signs and landscaping.

What other insurance types do I need?

Builders risk policies alone, however, do not typically cover liability (for accidents and injuries in the workplace). Stand-alone liability insurance may be secured in addition to course of construction coverage.  In addition to the owner liability, business and/or homeowner insurance policies, you should always request that your general contractor and all subcontractors provide their owner liability and worker’s compensation insurance to limit your risk s well.

Learn more insights about what builders risk insurance covers when you download the US Assure complimentary resource, From Groundbreaking to Remodeling: Builders Risk 101 Guide.

Disclaimer:

Redwood is in no way affiliated with or representative of US Assure or any other insurance provider.

Information provided on our website is intended as a general description of certain types of insurance and services available. Any description of policy provisions is meant to give a broad overview of coverages and does not revise or amend a policy. Refer to the policy coverage form for a complete representation of the scope of coverage, terms, conditions, exclusions and more. The policy is the contract that specifically and fully describes your coverage. Some products may not be available in all states and may only be offered on a non admitted basis. Redwood Construction Group does not provide legal or insurance coverages directly but do offer recommendations and help owners by procuring builders risk policies on the owner’s behalf on projects where requested at an additional cost.