What is builder's risk?
Builder's risk is a special kind of coverage that protects buildings while they are under construction. It is considered property insurance, as elements of the build that are damaged by covered incidents are eligible for repair or replacement. Covered incidents include fire, theft, explosions, lightning, acts of God, or hail. Beyond the insured structure, coverage can also include supplies, materials, and equipment (whether it is in transit, on-site, or stored at another location). A property or project owner may require a builder's risk policy, although architects, general contractors, lenders, subcontractors, and any individual or company that has a financial interest in the construction should be considered insureds on the policy.
Builder's risk coverage may be supplemented by Installation Floater Insurance. An installation floater protects against direct physical loss or damage to materials, as well as supplies and labour costs, for property being installed at job sites. Installation floaters may also cover materials while they are in transit or stored at temporary locations.
Synonyms for builder's risk
There are additional terms that cover the risk faced by construction projects, though the meaning of the coverage remains the same. One synonym is:
- Course of construction insurance: This is insurance that protects insurable interests for a development or construction project, including fixtures, materials, equipment, or a partially completed structure itself.
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When do I need to be aware of builder's risk?
Both residential and commercial new construction, installation, or renovation projects should be insured against the risks of the construction process. Damage or loss covered is policy-specific, though it does not overlap with the general liability coverage for accidents or operations. The policy focuses on property damage.
What is important to know about builder's risk?
- A builder's risk policy can extend beyond the cost of repair or replacement, with some policies adding coverage for soft costs, business income, or additional expenses. Property that may be covered can include fencing, temporary structures, scaffolding, landscaping, and signs. There are some other important things you should know about builder's risk: Policies generally have a location-specific, single-project application, but are underwritten to address the specific risks of the project.
- Blanket policies are multiple-project coverage options suitable for developers or large contracting companies.
Builder's risk exclusions typically include floods, earthquakes, employee theft, mechanical breakdowns, wear and tear, and wind damage.
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