No matter how safe you believe your business is, it’s still vulnerable to a number of different threats at any time. Without the right protection in place, your small business could face serious losses or even bankruptcy. That’s why adding small business hazard insurance is critical to your company’s success.

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builders risk insuranceWhat Is Builders Risk Insurance?

Builders risk insurance, also known as course of construction insurance, is a specialized type of property insurance that helps protect buildings under construction. It’s essential in helping protect construction projects, but can be complex and often misunderstood. However, having a properly structured builder’s risk insurance policy can be crucial. In fact, it will serve as the backbone of a successful risk management program.
Builder’s risk insurance helps protect construction projects from property damage due to:
  • Fire
  • Lightning
  • Hail
  • Explosions
  • Theft
  • Vandalism
  • Acts of God, like hurricanes

Who Needs Builder’s Risk Coverage?

Any person or company with a financial interest in the construction project needs builder’s risk insurance. Some common people you may want to include on your policy as insureds include the:
  • Property owner
  • General contractor
  • Subcontractors
  • Lender
  • Architects

Builders Risk Insurance Cost?

The cost of builder’s risk insurance is based on the total completed value of your structure. That includes the cost of all materials and labor, but excludes land value. This policy is also called course of construction insurance.

The cost of builder’s risk insurance typically accounts for 1% to 5% of a business’s total construction budget. For example, if your construction budget is $100,000, and you have a three-month builder’s risk policy, you might end up paying somewhere between $300 to $1,300 per month in premiums.
The following factors can affect the cost of your builder’s risk insurance policy:
    • Cost of the project.
    • Location of the project.
    • Timeline of the project.
    • Square footage of the construction site.
    • Expertise and experience of the contractors and subcontractors who will be handling the project.
    • Amount of coverage.
    • Quality of materials used in the construction.
    • Logistics of the project, such as where construction materials are stored.

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Builders Risk Insurance Coverages

  • Up to $100,000 for blueprints, schematics and other valuable documents that are associated with the project.
  • Contract penalties up to $50,000 if you owe fines or legal fees as a result of delays in the construction project.
  • Expedited costs up to $25,000 if you experience a loss and need to expedite new supplies or quickly hire additional labor.
  • Third-party property that is stored at the construction site.

What Types of Property Does Builder’s Risk Insurance Cover?

A basic builder’s risk insurance policy helps cover buildings and structures under construction. It also helps protect:
  • Materials
  • Supplies
  • Equipment on site, in transit or at other locations

What Does Builder’s Risk Insurance Cover?

A builder’s risk insurance policy helps protect your construction projects from certain kinds of property damage. It can also help cover additional soft costs, or expenses not directly related to construction, if property damage causes a delay. This can include:
  • Lost sales
  • Rental income
  • Additional interest on loans
  • Real estate taxes
Because every construction project is unique, each builder’s risk policy is different. You can customize your policy to fit your project’s needs by getting coverage extensions. Common extensions include protection for:
  • Scaffolding
  • Construction forms
  • Temporary structures
  • Debris removal and disposal in the event of a loss
  • Pollutant cleanup

Builders Risk vs. Homeowners Insurance

There are two types of insurance for homes: homeowners insurance and builders risk insurance. Homeowners insurance is for completed homes, while builders risk insurance is for homes that are still under construction. Insuring a house that is being built from the ground up is different than insuring a house that is already built. The insurance will have to be more specialized for the home that is being built.

Homeowners insurance protects your home and its contents provides coverage for additional living expenses and offers liability protection in case someone is injured on your property. Builders risk insurance, on the other hand, covers the property while it is under construction and does not include personal liability protection. General liability insurance should be provided by the builder to protect both the builder and the homeowner.

Regulating Agency and References

Insurance Information Institute (III)

This organization’s mission is to improve public understanding of insurance – what it is and how it works.
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