Construction projects involve changing values, active job sites, and materials moving between locations. If a fire, theft, storm, or other covered event damages the project, the financial impact can extend beyond physical property.
Builders’ risk insurance helps protect buildings and structures while they are under construction or renovation. It can provide coverage for the project, materials, and certain equipment, helping construction move forward after a covered loss.
What Does Builder’s Risk Insurance Cover?
Coverage varies by policy but may include:
- The building or structure under construction
- Building materials and supplies at the job site
- Materials in transit or temporary storage
- Equipment, machinery, and fixtures that will become part of the structure
- Temporary structures, scaffolding, and fencing
- Debris removal following a covered loss
- Certain soft costs or delay-related expenses
What Are Soft Costs?
Soft costs are expenses that may increase when covered property damage delays a project. Depending on the policy, these may include additional architectural fees, permit costs, financing expenses, real estate taxes, advertising expenses, or loss of rents.
These expenses are not automatically covered by every policy. Brokers should identify potential delay-related costs before construction begins and confirm how the policy addresses them.
What Does Builder’s Risk Insurance Not Cover?
Common exclusions may include:
- Normal wear and tear or deterioration
- Faulty design, materials, or workmanship
- Employee or contractor dishonesty
- Certain equipment breakdowns
- Bodily injury or damage to third-party property
- Contractors’ tools and equipment that will not become part of the structure
Who Needs Builder’s Risk Coverage?
Anyone with a financial interest in a construction project may need builders’ risk coverage. This can include property owners, developers, general contractors, subcontractors, lenders, and sellers of property under construction.
The construction contract or lending agreement often determines who is responsible for purchasing the policy. Establishing that responsibility before work begins can help prevent coverage gaps or confusion following a loss.
What’s the Difference Between Builder’s Risk and Contractor’s Equipment?
Builders’ risk generally protects the project and property that will become part of the completed structure. Contractors’ equipment coverage protects tools and mobile equipment used to perform the work, such as excavators, generators, and machinery that will not become a permanent part of the building.
The two coverages can work together, but they protect different property.
Coverage Built Around the Project
Every construction project brings a different combination of values, timelines, materials, and site exposures. Falvey’s Inland Marine team works with brokers to understand those details and explore Builders’ Risk coverage aligned with the project.
Have a construction opportunity? Contact our team to start the conversation or learn more about Falvey’s Inland Marine coverage.
