Builder’s risk insurance coverage provides property insurance designed specifically for buildings under construction. It protects a person or organization’s interest in the partially completed structure as well as materials, fixtures and equipment that will be used from the time construction begins through the point of completion. For example, a builder’s risk policy would cover losses if a fire burns down your partially constructed condominium complex.

Builder’s risk coverage is typically provided on a “special causes of loss” form. This means that coverage applies from damage or loss of property due to any cause with the exception of specifically excluded perils.

It is important to note that not all builder’s risk policies are created equal and the coverages can vary greatly from one insurance company to the next. Your policy should be tailored to meet your needs. For example, it can be extended to cover building materials while in transit or at temporary storage locations if they will become a permanent part of the building or structure. Another popular option for broadening your builder's risk policy coverage is adding soft costs: loss of business income, loss of rents, extra expense, interest on loans, etc. You should be sure to work with an agent who is knowledgeable with regard to the varying builder’s insurance coverage types.

Who needs Builder’s Risk Insurance? 

Any business entity with a financial interest in property under construction, renovation or repair needs a builder’s risk plan. Typically, the building owner is responsible for buying builder’s risk insurance, but it may be purchased by the contractor if it is required as a condition of the contract.

Insurable Interests may include, but are not limited to, the following:

• Property owner
• Contractor
• Sub-contractors
• Financial Institution providing funding
• Architects and/or engineersIt is worth noting that the majority of lenders will not provide financing for a project until builder risk insurance coverage is in place. In addition, commonly used contract documents available from the Association General Contractors (AGC) and the American Institute of Architects (AIA) contain specifications requiring a builders’ risk insurance policy. If the project owner fails to obtain a builders risk policy in accordance with contract requirements, the owner or whoever has the obligation to purchase the builder’s risk policy could be deemed in breach of contract.

Coverage gaps can occur if your contract is not thoroughly reviewed for the specific exposures and insurance requirements of your construction project. Remember, there are many options available for tailoring your builder’s risk policy so that it meets the needs of your contract.

Let Gatta Insurance tailor a Builder’s Risk Policy to fit your business and contractual needs.