Explaining Builder’s Risk Insurance Cost & Coverage

Understanding builder’s risk insurance is crucial to the success of a construction project. This form of insurance covers buildings and the area in which they are being built during construction. Also known as course of construction, builder’s risk insurance can vary greatly depending on your specific policy. While this type of insurance covers most accidents, it is important to understand what your specific policy covers.

During the course of a construction project, there are many risks that may arise. Builder’s risk insurance is there to help you cope with unexpected accidents. Some examples of incidents that would likely be covered include:

Weather (Hail, Lightning, Wind)

Theft/Vandalism

Fire/Explosion

Once you understand what your policy covers, it is crucial that you identify all exclusions and limitations. Most insurance policies have various exceptions to the areas that they cover.

For instance, while builder’s risk insurance covers damage from most natural disasters, it will often exclude certain disasters such as earthquakes and floods. If there is a high possibility that an earthquake or flood could occur in the area in which you are building, you will likely need to buy additional insurance.

While theft and vandalism are usually covered, it is important to note that this coverage likely does not apply to internal employees. Because of this, it is a good idea to run background checks on your employees before hiring them. This will help prevent you from dealing with employee theft.

Another common exclusion would be an act of war or nuclear accident. Most insurance policies won’t cover these types of incidents because damages would be very expensive. If you are working in an area where you believe this could occur, you will need to buy supplemental insurance.

So, how much does builder’s risk insurance cost?

Insurance policy cost can vary, but will usually be one to four percent of the construction cost. The more extensive insurance you want, the more expensive it will be. This is why risk evaluation is so important in the planning stages. If your project has a lot of risks, it’s probably a good idea to go with the more expensive insurance policy. It’s better to spend a little more initially than end up not having enough. Going with a good insurance company will also expedite your claims and make the claim process a lot smoother.

Extensions

Extensions of coverage can also be purchased for certain projects. Depending on your insurance policy and project, common extensions include:

Property in transit

Valuable papers

Sewer/drain backup

Property being used/installed in secure location

Scaffolding

If you aren’t accurately insured, the costs can start piling up. The last thing you want is to spend thousands of dollars paying for accidents that your insurance doesn’t cover. Every insurance company and policy is different, so make sure you read through yours thoroughly and recognize what you need!