Coverage Guides
Builders risk insurance, also called course of construction insurance, protects buildings and structures during the construction process against covered perils including fire, wind, theft, vandalism, and certain weather events. The policy covers the structure under construction, building materials on site and in transit, temporary structures, scaffolding, and sometimes soft costs like architectural fees and loan interest if the project is delayed by a covered loss. Coverage begins when construction starts and ends when the building is occupied, the owner accepts the structure, or the policy expires, whichever comes first.
Any party with a financial interest in a construction project should carry or be covered by builders risk insurance. This includes property owners, general contractors, and lenders. The policy is typically purchased by the project owner or the general contractor, depending on contract terms. Subcontractors may be covered under the project builders risk policy or may need their own coverage for their scope of work. Lenders virtually always require builders risk as a condition of construction financing. Even on smaller projects without lender requirements, builders risk protects the contractor investment in materials and labor already installed.
Standard builders risk policies cover the structure being built, materials stored on site, materials in transit to the site, temporary structures and equipment forming part of the building, and foundations. Named perils policies cover only listed perils like fire, lightning, wind, hail, explosion, theft, and vandalism. Special form or all-risk policies cover all causes of loss except those specifically excluded, providing broader protection. Additional coverages may include scaffolding, construction forms, temporary fencing, landscaping, and debris removal. Optional endorsements extend coverage to include delay in completion, soft costs, ordinance or law upgrades, flood, earthquake, and testing of mechanical and electrical systems.
Standard builders risk policies exclude damage from employee dishonesty, faulty workmanship, design defects, wear and tear, mechanical breakdown, and earth movement unless endorsed. Flood and earthquake typically require separate endorsements or policies. Most policies exclude losses caused by the contractor own faulty work, though resulting damage from faulty work may be covered. Named storm deductibles apply in hurricane-prone coastal areas. Penalties for late completion, consequential damages, and lost profits are typically excluded unless soft cost or delay endorsements are purchased. War, nuclear hazard, and government action exclusions are standard across all property policies.
Builders risk premiums are calculated as a percentage of total completed project value, typically ranging from 1% to 4%. Key cost factors include construction type (frame versus non-combustible), project location (coastal versus inland), occupancy type (residential versus commercial), project duration, security measures, and whether the project involves renovation of an existing structure. Renovation projects cost more to insure due to increased fire risk and the complexity of working around existing structures. Protective safeguards including fire alarms, sprinklers, and site security can reduce premiums. Deductible options range from $1,000 to $50,000 or more, with higher deductibles reducing premium.
When a covered loss occurs during construction, immediately secure the site to prevent additional damage and document the damage with photographs and video. Notify your insurance broker and carrier as soon as possible, as most policies require prompt notice. Separate damaged materials from undamaged materials and do not dispose of damaged items until the adjuster has inspected them. Obtain repair estimates from qualified contractors. Maintain detailed records of all costs associated with the loss including temporary repairs, debris removal, and any delay-related expenses. Your ALKEME broker will help manage the claims process and advocate for a fair settlement with the carrier.
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