What is Builder’s Risk Insurance?
Builder’s risk insurance is a specialized property insurance designed to safeguard construction projects builders risk during their development phases.
It provides coverage for property owners, contractors, and investors against unexpected setbacks and financial losses.
Builder’s risk insurance is essential for many builders, protecting construction projects from property damage and covering additional soft costs.
It can be customized to fit the needs of each construction project through various coverage options and extensions.
Who Needs Builder’s Risk Insurance?
Property owners who own a property undergoing construction or renovation need builder’s risk insurance.
Contractors general contractors and investors who have a financial stake in a construction project also require builder’s risk insurance.
Builder’s risk insurance is typically needed for properties under construction or renovation.
It’s essential for commercial property, business owners and builders to have builder’s risk insurance.
What Does a Builder’s Risk Policy Cover?
A builder’s risk policy covers damage to the insured structure from various events, including fire, theft, vandalism, and natural disasters.
It provides full liability coverage for the structure, materials, and equipment during the course of construction.
Builder’s risk insurance may also cover damage to other construction materials, equipment and tools.
It covers property damage and protects against financial losses, making it an essential part of any construction project in Texas.
Types of Properties Eligible for Builders Risk Insurance
- Builder’s risk insurance can cover various properties and construction sites, including residential and commercial properties.
- It can cover new construction and renovation projects, as well as properties under construction, renovation, or demolition.
- Builder’s risk insurance is available for both residential and commercial builders in Texas.
- It provides coverage for property owners, contractors, and investors.
Exclusions and Limitations of Builder’s Risk Insurance
Builder’s risk insurance typically does not cover damage caused by intentional acts or gross negligence.
It may not cover damage caused by faulty workmanship or design.
The policy may not cover damage to an existing structure or structures or property not related to the construction project.
Builder’s risk insurance policy generally does not cover liability claims, such as bodily injury or property damage suffered by third parties.
How to Find the Right Builder’s Risk Insurance Policy
- Identify your insurance needs by considering the type of property, project duration, budget, and potential hazards.
- Seek expert advice from an insurance agency to clarify any uncertainties and guide the process along.
- Carefully review the coverage limits, details, exclusions, and policy conditions.
- Consult with an independent insurance agent for personalized advice.
Policy Ownership and Responsibility
The general contractor and property owner are usually responsible for discussing and agreeing on the payment arrangements based on the project’s details.
The property owner may also need to purchase a builder’s risk policy if they are funding the construction project.
It’s essential to review the policy carefully to understand who is responsible for purchasing the policy.
Cost of Builder’s Risk Insurance
The builder’s risk insurance cost depends on various factors, including the location, value, and duration of the construction project.
Insurance agents calculate the construction insurance will cost as a percentage of the total construction cost.
The rates usually range from 1% to 5% of the project’s value.
The cost of builder’s risk insurance is a small price to pay for the peace of mind it provides.
Optional Coverage and Endorsements
This commercial insurance policy does not include General Liability Insurance or Liability Insurance.
A separate Premise Liability policy can be purchased for slip and falls, but not for injuries by sub-contractors.
Workers Compensation Insurance covers injuries by sub-contractors working at the job site.
Optional coverage extensions include protection for scaffolding, construction forms building materials, temporary structures, debris removal and disposal, and pollutant cleanup.
Valuing the Project for Builder’s Risk Insurance
Insure the project to the total completed cost, and the insurance carrier will only cover damages up to the coverage limit.
Consider construction material and labor costs when determining insurance coverage amount.
The insurance carrier will only cover damages up to the coverage limit.
It’s essential to value the project accurately to ensure adequate coverage.
Post-Project Procedures and Policy Cancellation
- Once the project is complete, the builder’s risk insurance will expire.
- You can get property insurance to cover structures in the case of fire, theft, hail, or other accidents.
- If your project needs to be transported, inland marine insurance will cover materials and supplies while they are in transit.
- It’s essential to review the policy carefully to understand the options and costs.
Benefits of Working with a Specialized Insurance Agency
- We provide coverage for Texas builders and property owners at an affordable price.
- We work with leading insurance companies and are ready to answer your questions.
- Get a Texas Builders Risk Quote by calling (850) 389-2001.
- We provide expert insurance advice in specialty markets like Builders Risk Insurance.
Conclusion
To ensure you find the right builder’s risk policy for your project, take the initiative to assess your builder’s risk insurance cover needs, research reputable providers, and compare quotes.
Seek guidance from independent insurance agents to make an informed decision.
By taking these steps, you can protect your investment and have peace of mind throughout the course of construction insurance itself.
It’s essential to prioritize builder’s risk insurance to safeguard your construction or renovation project.
Chris Ekai is a Risk Management expert with over 10 years of experience in the field. He has a Master’s(MSc) degree in Risk Management from University of Portsmouth and is a CPA and Finance professional. He currently works as a Content Manager at Risk Publishing, writing about Enterprise Risk Management, Business Continuity Management and Project Management.