Builder’s Risk Insurance, which some refer to as Course of Construction Insurance, is a form of commercial property insurance which covers a building where the building or insured area is presently being constructed or heavily remodeled.
It can cover just the structure, or also the materials on site waiting to be installed or transported to the job site.
The builder’s risk insurance policy will pay for damages up to the coverage limit in the policy. The limit must accurately reflect the total completed value of the structure (all materials and labor costs, but not including land value).
The construction budget is the best source for determining the appropriate limit of insurance.
Builder’s Risk insurance policies can often be purchased in terms of three-months, six-months, or 12-months. If the project is not completed by the end of the initial policy term, it can often be extended, but usually only one time.
What Does a Builder’s Risk Cost?
The builders risk policy will provide coverage for damage done to the insured structure from a wide variety of events.
Damage from the following events will be covered by most policies:
- Fire
- Wind (may be limited in coastal areas)
- Theft
- Lightning
- Hail
- Explosion
- Vandalism
- Vehicles/Aircraft
You should read your course of builder’s risk insurance policy to be familiar with its limitations and exclusions. Limited coverage is provided for collapse. Standard exclusions include:
- Earthquake
- Employee theft
- Water damage
- Weather damage to property in the open
- War
- Government action
- Contract penalty
- Voluntary parting
- Mechanical breakdown
An important exclusion which should be read in its entirety excludes coverage for damage resulting from faulty: design, planning, workmanship and materials. Earthquake and flood coverage may be purchased in some areas.