Builder's Risk Insurance in Construction Industry

Builder's risk insurance is a specialized type of construction insurance that helps to protect buildings under construction. Every successful risk management program ensures to have a builder's risk insurance.

Let's discuss each and every aspect of a builder's risk insurance and associated features.

Features of Builder's Risk Insurance

1. Builder's risk insurance is recommended for any person or company with a financial interest in the construction project. This personnel includes contractors property owners, general contractors, subcontractors, lenders, and architects.
2. The different properties a builder's risk insurance cover includes Building or structure under construction, Foundations, Fixtures and machinery, Building materials and supplies onsite, Temporary structures, Property in transit, Property stored offsite, Office trailers, and Underground pipes. 
3. Building risk insurance is required for all buildings, irrespective of the size of the building (large office or small home building).
4. This insurance is important for general contractors who are performing new construction or renovations. 
5. Builder's risk insurance help to manage the risk of a construction project and ensure timely completion of the project.
6. Building risk insurance covers all the incidents that could happen to a building project during its construction.

What does a Builder's Risk Insurance Cover?

Most builder's risk insurance covers physical damage to any of the covered properties. 

Builder's risk insurance covers the following incidents:

1. Disasters include fire/explosion, hail, lightning, and windstorm.
2. Theft and vandalism ( theft of construction equipment)
3. Vehicle or Aircraft crash

What Builder's Risk Insurance Not Cover?

The incidents that are not covered in builder's risk insurance are:

1. Earthquakes and floods
2. Employee theft
3. Wear and tear
4. Mechanical breakdown
5. Radiation
6. Terrorism and acts of war
7. Settling, cracking, and expansion
8. Freezing
9. Government action
10. Contract penalty
11. Voluntary parting

In certain areas, earthquake and flood coverage can be purchased in the insurance.

Cost of Builder's Risk Insurance

Builder's risk insurance generally costs one to four percent of the construction cost. But it varies based on the coverage and exclusion that the policy provides.

A good insurance company helps expedite the claims and helps solve any potential claims during the construction process. 

Builder's risk insurance is a part of the soft costs of construction, and it will cost some money. 

While taking builder's risk insurance, extensions can be taken for certain situations. Generally, a builder's risk insurance is taken in combination with general liability insurance.

Also Read: What is general liability insurance?