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Understanding Builder’s Risk Insurance

Builder's Risk Insurance

Builder’s risk insurance is a temporary policy covering the property, contractor’s materials, and equipment during the construction or renovation of a building. Coverage terminates when construction is complete, and the property is ready for use.

What Does Builder’s Risk Cover?

This type of insurance covers damages from:

  • Lightning or hailstorms
  • Fire or explosions
  • Theft or vandalism

It can also help cover additional expenses if property damage causes a delay in construction. Costs can include things such as lost rental income, interest on loans, and real estate taxes.

Are There Exclusions?

This type of coverage has exclusions, such as damage from earthquakes, landslides, or flooding. Losses caused by bacteria, dry rot, or failure of utility services are also generally excluded from coverage. Adding extensions can customize your policy to fit each project’s needs.

It is essential to obtain a policy before your project begins. Work completed before coverage will not be covered. The insurance company will only cover construction done after the coverage start date.

Is a Builder’s Risk Policy Required?

Risk insurance is not compulsory but is often a contractual obligation. Compliance with local city, county, and state building codes may require proof of insurance.

Builder’s risk insurance can be confusing. Ensuring you have a properly constructed policy can be a critical asset in risk management.