Builders’ risk insurance is a policy designed to protect buildings and structures under construction. If an incident were to occur at a construction site, such as a fire or burglary, this insurance would help cover costs to get the project back up and running. For example, this coverage could repair or replace broken or stolen materials and pay for the costs associated with rebuilding.
While builders’ risk insurance policy is undoubtedly helpful in the case of certain kinds of property damage to a construction site, it’s important to realize it’s not an end-all-be-all solution. In fact, there are quite a few exceptions policyholders should be aware of when purchasing this kind of coverage.
Because there tend to be some misconceptions about what exactly this insurance policy does and doesn’t cover, we’ve provided some helpful clarifications below.
Misconception: Builders’ risk insurance includes liability coverage.
This insurance policy actually does not provide liability coverage as it only protects the construction site and associated materials, tools, and equipment. This means that it doesn’t protect against injuries, property damage, or libel.
Therefore, those overseeing construction projects often invest in builder’s risk insurance to protect their job sites, and then add on another policy, such as general liability coverage, which includes the cost of medical bills, settlements, and legal fees.
Misconception: The coverage protects against damages due to faulty design and poor workmanship.
This insurance covers damage due to incidents like hail, wind, fire, explosions, theft, and vandalism. However, it does not include damage because of faulty designs, poor workmanship, or defective materials.
Misconception: This policy continues after the project is complete.
Builders’ risk insurance is only active as long as the site is under construction. Meaning the coverage ends once the project is complete. For instance, if a storm rolls through and knocks down a wall three months after construction was finalized, a builder’s risk insurance policy wouldn’t apply. Instead, a property insurance policy would need to be in place to cover this sort of damage and any future damage to the site.
Misconception: Builders’ risk insurance is the only policy construction sites need for full coverage.
Builders’ risk insurance is not meant to be a standalone policy. While it certainly offers some helpful protections, it’s best to purchase it in conjunction with other policies to close any gaps. For example, builders’ risk insurance covers damage to materials and equipment at a construction site caused by fire. However, it does not cover medical bills or lawsuits from injuries.
Builders’ risk insurance is important to have as it can help reduce exposures at construction sites, but it’s crucial to understand its limitations. Contact Falvey Insurance Group to find out more.
