Builder’s risk insurance, also known as course of construction, is a type of property insurance. It’s a bit unique in that it covers the area of a construction project whether new construction or renovation. In some cases, it will just cover the structure, while in others, it will also cover the materials that are on site and waiting to be installed or transported. Most building owners will ask that a builder carry this to protect both parties.
However, as with any insurance type, there are questions as to what this covers. A builder’s risk policy will cover damages up to the specified coverage limit. The payout can include labor costs and materials, though not land value. The construction budget is the best indicator of the amount that the insurance should provide coverage for.
When you have builder’s risk insurance coverage, your insurance company is proving a policy that will cover many types of damages and money loss events for a variety of items. Some examples of what is covered by builder’s risk include:
As you can see, this type of insurance is made to cover what you are doing on the site. For that reason, you will often find that the property itself is not included or is for an additional coverage option. This goes for any purpose that the insurance could be called upon. On the other hand, the two main events that can trigger your builder’s risk insurance are:
Different policies will include and exclude different items. These are known as exclusions and limitations. Depending on the plan you might find that employee theft, environmental damage to the job site or property and governmental issues like war and policy are all excluded from your policy. Depending on the area, you might be able to purchase earthquake, wind, or flood damage for an extra cost.
In general, you will find that the builder’s risk cost will be between 1% and 5% of the total budget for construction. However, since most employers will require this type of insurance, you should work to include the cost into your budget. Even if you don’t have this type of insurance coverage as a requirement, you should work to add it anyway. Should something happen, this could end up saving you thousands of dollars or more.
In general, your policy expiration date will be within three, six, or twelve months. However, you can extend the policy until the project is completed or space is occupied. When you complete your project, you will need a new type of insurance. Also, many policies will only let extend your policy once before requiring you to get a new insurance policy altogether.