Builder Risk Insurance: Everything You Need to Know

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If you’re a builder, contractor or developer, then you’ll be aware of the many risks associated with construction work. From fires and natural disasters to theft and vandalism, there are countless unexpected events that can cause damage and delays to your construction project. This is where builder risk insurance comes in. In this article, we provide a comprehensive guide to builder risk insurance and why it’s essential for any construction project.

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What is Builder Risk Insurance?

Builder risk insurance, also known as course of construction insurance, is a type of property insurance that provides coverage for buildings and structures while they are under construction or renovation. It typically covers damage caused by fire, theft, vandalism, natural disasters, and other unexpected events.

Builder risk insurance policies are usually taken out by the contractor or builder, although they may also be required by the project owner or financier. The policy usually covers the cost of materials, labour, and other expenses associated with the construction project.

The duration of the policy is typically for the length of the construction project, and the coverage typically ends once the project is completed and occupied.

What Does Builder Risk Insurance Cover?

Builder risk insurance provides coverage for a variety of risks associated with construction projects. Some of the most common risks covered by builder risk insurance include:

Risks Covered
Examples
Fire
Electrical fires or fires caused by welding or cutting tools
Natural Disasters
Floods, hurricanes, tornadoes, hail storms, and earthquakes
Theft
Stolen tools, equipment, or materials
Vandalism
Graffiti or intentional damage to the construction site
Accidents
Injury or death of workers, bystanders, or visitors

It’s important to note that builder risk insurance does not cover every possible risk associated with construction projects. For example, it typically does not cover damage caused by faulty workmanship or design.

Who Needs Builder Risk Insurance?

Any contractor, builder or developer involved in a construction project should consider taking out builder risk insurance. This includes new construction projects, renovations, and expansions.

Builders risk insurance provides coverage for any loss or damage to buildings and structures during the construction process. This means that the builder or contractor will not be held financially responsible for any of the damages that may occur during construction.

How Much Does Builder Risk Insurance Cost?

The cost of builder risk insurance varies depending on the size and scope of the construction project. The premium is typically calculated based on the total value of the project, the duration of the policy, and the level of coverage required.

As a general rule, builder risk insurance premiums range from 1% to 5% of the total construction project cost. This means that for a $500,000 construction project, the builder risk insurance premium could range from $5,000 to $25,000.

Benefits of Builder Risk Insurance

Builder risk insurance offers a variety of benefits to contractors, builders and developers. Some of the key benefits include:

Protection from Losses and Damages

One of the main benefits of builder risk insurance is that it provides protection from losses and damages associated with construction projects. This means that if there is any damage to the building or structure during construction, the builder or contractor will not be held financially responsible.

Peace of Mind

Knowing that you have builder risk insurance in place can provide peace of mind throughout the construction process. This can help alleviate stress and allow you to focus on completing the project on time and within budget.

Compliance with Contractual Obligations

Many construction contracts require builders or contractors to have builder risk insurance in place. Having this coverage can ensure compliance with contractual obligations and prevent any potential legal issues.

Enhanced Professionalism

Taking out builder risk insurance can enhance your professionalism and reputation as a responsible business owner. This can help you attract more clients and win more contracts in the future.

Frequently Asked Questions (FAQ)

What is the difference between builder risk insurance and general liability insurance?

Builder risk insurance covers loss or damage to buildings and structures during construction, while general liability insurance covers bodily injury or property damage caused by the business operations of a contractor or builder.

What is not covered by builder risk insurance?

Builder risk insurance does not cover damage caused by faulty workmanship, design, or intentional acts of the policyholder.

Who is responsible for obtaining builder risk insurance?

The builder, contractor or developer is typically responsible for obtaining builder risk insurance, although the project owner or financier may also require it as a condition of the project.

How long does builder risk insurance coverage last?

Builder risk insurance coverage typically lasts for the duration of the construction project, and may be extended if the project is delayed or extended.

Is builder risk insurance mandatory?

Builder risk insurance is not mandatory, but it is highly recommended for any contractor, builder or developer involved in a construction project.

Conclusion

In summary, builder risk insurance is essential for any contractor, builder or developer involved in a construction project. This type of insurance provides coverage for loss or damage to buildings and structures during the construction process, and can offer peace of mind, protection from losses and damages, and enhanced professionalism. If you’re involved in a construction project, then be sure to consider taking out builder risk insurance to protect yourself and your business.

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