insurance

Builder’s risk insurance, also known as construction risk insurance or course of construction insurance, is a specialized type of insurance coverage designed to protect property owners, contractors, and other parties involved in construction projects from financial losses resulting from various risks and perils that can occur during construction. This type of insurance is typically temporary and provides coverage for the duration of the construction project until it is completed and handed over. The construction contract typically requires the purchaser to bind a policy once the permit has been issued.

Here are some key aspects of builder’s risk insurance:

1. Coverage Scope: Builder’s risk insurance provides coverage for damage or loss to the insured property during construction. This includes the structure itself, materials, supplies, equipment, and machinery on the construction site. Coverage typically extends to risks such as fire, vandalism, theft, windstorms, lightning, and other specified perils.
2. Parties Covered: Various parties involved in the construction project can be covered under builder’s risk insurance, depending on the policy. Common insured parties include property owners, contractors, subcontractors, lenders, and sometimes architects and engineers.
3. Duration: Builder’s risk insurance is temporary and is typically a 12-month policy and covers the construction project from the start of construction until it is completed and ready for occupancy. The coverage may also include a certain period for post-construction activities, such as testing and inspections. Should the construction take longer than 12 months the policy will have to be extended.
4. Exclusions: Policies may have specific exclusions, so it’s essential to review the policy carefully to understand what is and isn’t covered. For example, normal wear and tear, design errors, and certain acts of negligence may be excluded.
5. Coverage Limits: The policy will specify the coverage limits, which represent the maximum amount the insurer will pay in the event of a covered loss. The limit should be sufficient to cover the total value of the project, including materials and labor costs.
6. Deductibles: Like other insurance policies, builder’s risk insurance often includes a deductible. The insured party is responsible for covering losses up to the deductible amount, and the insurance kicks in to cover losses beyond that threshold.
7. Additional Coverages: Some builder’s risk policies offer optional or additional coverages that can be tailored to the specific needs of the project. These might include coverage for soft costs (e.g., design fees), delay in completion, or pollution liability.
8. Premiums: The cost of builder’s risk insurance premiums is typically based on factors such as the project’s location, the value of the construction, the type of construction, and the level of coverage.
9. Certificate of Insurance: Many construction contracts require the builder or contractor to provide a certificate of builder’s risk insurance to demonstrate that they have obtained the necessary coverage.

Builder’s risk insurance is essential for protecting the financial interests of parties involved in construction projects, as unforeseen events or accidents can result in substantial losses. Property owners, contractors, and other stakeholders should carefully assess their insurance needs and consider builder’s risk insurance as part of their risk management strategy during construction projects. Consulting with an insurance professional who specializes in construction insurance is advisable to ensure the appropriate coverage is in place.