What is the End Of Coverage for Builder’s Risk Insurance?

Unlike other types of insurance, builder’s risk insurance can have a complicated end date. We’re here to help.

If you have experience in obtaining insurance policies, then you understand that most policies have a clear beginning and a clear end. Most insurance companies will call these effective and expiration dates. 

However, if you’re new to the world of construction insurance, then you might not understand when builders risk coverage is ineffective. Builders risk is different because it doesn’t always have perfect expiration dates. This type of insurance coverage is placed during the course of construction. 

That means that it is meant to cover the building’s worth based on the percentage of the project complete. As such, the insurance policy increases in value as time goes on. Due to the unique factors presented above, there are a few ways that the effective date of this insurance becomes invalid. Today we’re going to talk about four major ways this can happen.

The Owner or Purchaser Takes Over

During construction, the general contractor will be responsible for the insurance of the construction project. However, if the owner takes over the project, then the insurance becomes invalid. The owner could be the bank, owner, or purchaser. In any case, it does not matter how complete the project is. Builders risk will no longer cover anything that happens on-site. A new type of policy must be purchased.

Insurable Interest Changes

An insurable interest is someone who’s involved with the construction project. This could be the bank, investors, or the owner. If any of those parties change during the course of construction, then the insurance needs to be changed to represent that. The old insurance will become invalid, and new insurance will need to be drafted with the current insurable interests.

The Project Will Not Be Completed

Insurance coverage does not extend past the intent to complete. That means If a construction company walks away from a site without intending to finish its construction, then builders risk insurance no longer covers the site. The insurance company does not want to take the risk of insuring an abandoned building due to its higher risk of vandalization in the form of graffiti, fire, and break-ins. The owner of the site can purchase a separate and more expensive insurance policy if they still wish for the abandoned site to be insured.

The Property Is Being Used

If during construction, the property starts to be used in the manner intended, builders risk insurance will no longer cover it. For example, let’s say that an apartment complex is being built. During the course of construction, people move into the completed apartments, but the whole building is not yet done. At this point, builders risk insurance will have to be changed to something like property insurance. It’s cheaper and covers what actively happening on the site. Additional insurance can be purchased to cover the construction still actively happening on site.