Introduction to Builders Risk Policy

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Out of the many insurance policies which individuals and businesses may obtain to protect their interests, one important policy which arises in the construction industry is a builder’s risk policy.

In summary, a builder’s risk insurance policy is a specialized type of property insurance that provides insurance coverage for buildings under construction. A builders risk policy can provide insurance coverage for your construction projects from certain kinds of property damage due to:

  1. Fire;
  2. Lightning;
  3. Hail;
  4. Explosions;
  5. Theft;
  6. Vandalism; and/or
  7. Acts of God, like hurricanes

While a basic builder’s risk insurance policy helps cover buildings and structures under construction, it also provide coverage for materials, supplies, and equipment on site, in transit, or at other locations. In some cases, it can also help cover additional soft costs or expenses not directly related to construction, if property damage causes a delay. This can include items such as lost sales, rental income, additional interest on loans, and real estate taxes.

Depending upon the insurance company, you may be able to customize your policy to fit your project’s needs by getting coverage extensions through policy endorsements. Some common extensions or endorsements may also be able to provide insurance coverage for items such as scaffolding, construction forms, temporary structures, debris removal and disposal in the event of a loss, and pollutant cleanup.

Although each policy is different, some of the more common exclusions of insurance coverage can include items such as:

  1. Earthquake;
  2. Flood;
  3. Wind;
  4. Wear and tear;
  5. Acts of terrorism and/or war;
  6. Employee theft;
  7. Rust and corrosion;
  8. Mechanical breakdowns; and/or
  9. Damage due to faulty design, planning, workmanship and materials, and engineers

It is important that you, as the building owner, review your policy to make sure that it contains the appropriate coverages and to see whether coverage is being provided on an actual cash value basis or replacement basis.

It is also important that you give some consideration as to who you may also want covered under the policy as insureds. Some insured you may consider listing are the property owner, general contractor, subcontractor(s) , lender(s); and/or architect(s).

If you have a builders risk insurance policy and suffer damages that should be covered by your insurance and are having difficulty with your insurance company, please consult with an attorney who is familiar and experienced with builders risk insurance policies and claims to advise you on your legal rights and offer you alternatives to protect those rights.

DISCLAIMER: This and other segments posted on this website are offered for informational and discussion purposes only and is not offered as legal advice. This office only represents homeowners and property owners. We do not represent insurance companies. The information contained in this segment should not be considered to be legal advice.