What Does Builder’s Risk Insurance Cover?

Builder’s risk insurance provides specialized property coverage for buildings and structures undergoing construction or renovation. This policy safeguards against financial losses from physical damage to a construction project during its active building phase. Unlike standard property insurance, it addresses the unique risks of an unfinished structure and its components, protecting the significant investment from groundbreaking to completion.

Covered Perils

Builder’s risk insurance typically covers a broad range of events that can cause physical damage to the construction project. These policies are often “all-risk,” meaning they cover any peril unless specifically excluded. Common perils include fire, lightning, windstorms, and hail. Damage from natural forces is generally covered, though wind coverage may vary by location.

Theft and vandalism are frequently included. Explosions and vehicle collisions that impact the site are usually covered. Certain types of water damage, such as from burst pipes, are typically covered. Some policies may also cover damage from structural collapse.

Covered Property

Builder’s risk policies protect various types of physical assets related to the construction project. The primary covered item is the structure under construction, from foundation and framing to permanently installed fixtures. This includes new buildings and existing structures undergoing major remodeling or additions. The policy extends to construction materials and supplies intended for the project, whether stored on-site or at another location.

Materials and equipment in transit to the job site are also frequently covered. Temporary structures essential for construction, such as scaffolding, construction forms, and temporary fencing, are typically included. Some policies may even cover documents and data, like blueprints, if damaged or lost.

Typical Exclusions

While comprehensive, builder’s risk policies contain specific exclusions. Losses from faulty design, planning, or workmanship are commonly excluded, meaning the cost to correct inherent defects is not covered. However, some policies may cover resulting damage if faulty work leads to an otherwise covered peril, such as a fire from defective electrical equipment. Normal wear and tear, rust, and corrosion are generally not covered, as these are expected conditions.

Damage due to mechanical breakdown of equipment is often excluded unless it results from a covered peril. Acts of war, nuclear hazards, and government actions like property seizure are also standard exclusions. Certain natural disasters, such as earthquakes and floods, are typically excluded from standard policies and require specific endorsements or separate policies for coverage. Employee theft may also be excluded.

Parties and Project Stages Covered

A builder’s risk policy can protect various parties with a financial interest in the construction project. This typically includes the property owner, general contractor, and sometimes subcontractors. Lenders involved in financing the project and architects or engineers may also be named as insured parties. The specific individuals or entities covered depend on the policy’s structure and the construction contract.

Coverage generally commences when construction materials are delivered to the site or when ground is broken, signifying the start of physical development. The policy is temporary and typically concludes when the project reaches a defined stage of completion. This can be when the building is completed, occupied in whole or in part, or sold. Policies often have provisions for ending coverage if the project is substantially completed, typically within 60 to 90 days of occupancy or completion.