Construction Insurance | Builders Risk

Construction Insurance ­| Builders Risk

Builder's risk insurance is a special type of property insurance for houses while they are under construction that protects against loss.

New houses under construction or homes being renovated are vulnerable to loss.

Houses are subject to many different risks while under construction. They may catch fire, be damaged by high winds, vandalism, (& sometimes theft), or other extraordinary events or circumstance beyond your control.

The general contractor may be responsible for any losses caused by his own negligence, but the owner is responsible for most other losses. As an owner/builder, you are both the general contractor and the owner. Builder's risk insurance protects against some of these losses.

Coverage

Builder's risk insurance usually guarantees against losses due to fire, vandalism, lightning, wind, and similar forces. It usually does not cover earthquake, flood, acts of war, or intentional acts of the owner. Coverage is typically during construction period only.

Who buys builder's risk insurance?

It is usually bought by the owner of the building but the general contractor constructing the building may buy it if it is required as a condition of the contract.

Renovations & Remodeling

If the project involves renovations or additions to an existing building, the owner's existing property insurance may cover the work under construction, obviating the need for builder's risk insurance. (Policies vary.)

However, in the case of new buildings under construction on vacant sites, the owner may not have an existing policy that provides coverage.

Your lender will require a builder’s risk policy to be in force prior to loan closing.

If you already own the land, you should have one in force even before the loan closes.

If you have started construction, even if you have a pile of sand or dirt on the property, or a hole for the basement dug, you are vulnerable to loss.

I don’t mean to scare you, but I know of two separate instances where children playing on the construction site were fatally injured, one by suffocation in sand pile and another by falling in the basement excavation hole.

Construction sites are like a “child magnet”. What child can resist?

Construction sites are also like a magnet to thieves.

You should also try to get theft coverage as part of a builder’s risk policy, even if it has a rather high deductible.

Theft insurance is usually NOT available to professional general contractors but ironically, it can be found if you are an owner/builder. Shop, shop, shop!

Carl