Builders Risk Insurance Cost: Everything You Need to Know

You’ve finally decided to build your dream home, office or commercial property. Congratulations! The next step is to ensure that your construction is protected from various risks that can arise during the construction process. Builders risk insurance provides coverage for construction projects, but do you know how much it costs? In this article, we will discuss everything about builders risk insurance cost, including factors that affect the cost, the average cost, ways to save money, and frequently asked questions.

Factors That Affect the Cost of Builders Risk Insurance

Several factors affect the cost of builders risk insurance. Understanding these factors will help you plan and budget for the cost of protecting your construction project. Here are some of the main factors:

The Value of the Project

The value of the project is one of the primary factors that determine the cost of builders risk insurance. If your project has a higher value, it will cost more to insure it. Insurance companies use this factor to determine the amount of coverage you need and how much you should pay in premiums.

The Location of the Project

The location of your construction project is another factor that affects the cost of builders risk insurance. Some areas are more prone to natural disasters such as hurricanes, floods, and earthquakes. If your project is in a risky location, it will cost more to insure it. On the other hand, projects located in low-risk areas are cheaper to insure.

The Type of Project

The type of construction project also affects the cost of builders risk insurance. Residential projects are usually cheaper to insure compared to commercial projects. Projects that involve higher risks, such as demolition or hazardous materials, will attract a higher premium.

The Length of the Project

The length of your construction project also affects the cost of builders risk insurance. The longer your project takes, the higher the premium you will pay. This is because the longer the construction period, the higher the chances of risks occurring.

The Deductible

The deductible is the amount you pay out of pocket before the insurance company pays the remaining amount. Choosing a higher deductible will lower the cost of builders risk insurance. However, a higher deductible means that you will pay more out of pocket in case of a claim.

The Average Cost of Builders Risk Insurance

On average, builders risk insurance costs between 1% to 4% of the total construction cost. For instance, if the total construction cost is $300,000, you can expect to pay between $3,000 to $12,000 in builders risk insurance premiums.

However, this is just an estimate. The actual cost of builders risk insurance will depend on the factors we discussed above.

Ways to Save Money on Builders Risk Insurance

Builders risk insurance may seem expensive, but there are ways you can save money. Here are some tips:

Compare Quotes From Multiple Insurers

Don’t settle for the first quote you receive. Contact multiple insurance companies and compare their rates. You may be surprised by how much you can save by shopping around.

Opt for Higher Deductibles

If you can afford it, choose a higher deductible. This will lower the cost of the insurance premiums.

Choose a Lower Coverage Limit

Choosing a lower coverage limit will also lower the cost of builders risk insurance. However, make sure you don’t underinsure your project. Otherwise, you may end up paying more in case of a claim.

Choose a Safe Location

Projects located in low-risk areas attract lower premiums. If you have a choice, choose a location that is less risky.

Frequently Asked Questions

What is builders risk insurance?

Builders risk insurance is a type of insurance that protects your construction project from risks such as fire, theft, natural disasters, and vandalism.

What does builders risk insurance cover?

Builders risk insurance covers the project’s materials, supplies, and equipment, as well as the structure itself. It also covers the cost of temporary structures and the cost of removing debris after a loss.

Do I need builders risk insurance?

If you are a property owner or contractor, you need builders risk insurance to protect your construction project from various risks. Without insurance, you may have to pay for any unforeseen expenses out of pocket.

How long does builders risk insurance last?

Builders risk insurance usually lasts for the duration of the construction project. However, you may extend the coverage if the construction takes longer than anticipated.

Can I cancel builders risk insurance?

Yes, you can cancel builders risk insurance. However, you may have to pay a penalty for early cancellation.

By understanding the factors that affect the cost of builders risk insurance and implementing the tips we discussed, you can save money and protect your construction project from various risks. Remember to shop around for quotes, choose a safe location, and opt for higher deductibles. With this information, you can make an informed decision and get the best insurance coverage for your project.