Industry Trends

Builder’s risk insurance: What is it and why does it matter?

Find out what builder's risk insurance is, who pays for it, and what it covers. Hint: It's important to the owner, contractors and subcontractors that are working on a project.

New construction home protected by an umbrella symbolizing builder's risk insurance.

To get the low-down on what builder’s risk insurance is and everything that makes it so important, we interviewed Jill Aldredge, vice president at SilverStone Group. Check out these answers to common questions about this type of insurance below.

What is builder’s risk insurance?

Builder’s risk insurance is property insurance meant to cover new construction (ground-up) or even renovation work on an existing structure (but not the existing structure itself).

What does builder’s risk insurance cover?

A builder’s risk policy provides coverage on any property that will become a permanent part of a structure, regardless of who owns that property prior to installation. It even provides coverage on those items that are included in the contract cost while they’re in transit to a job site or stored at a location other than the construction site.

Who purchases builder’s risk insurance?

Owners and contractors both purchase builder’s risk coverage, but for residential construction, it’s often easier for a contractor to purchase coverage through a reporting form type policy. The value of the project should be the construction cost, including labor and profit but excluding land.

What is or isn’t covered by builder’s risk insurance?

Standard builder’s risk policies don’t include coverage for flood, earthquake, equipment breakdown or testing of HVAC or electrical systems, but those coverages can normally be added for an increase in the builder’s risk rate. All claims for property damage on an insured site are meant to be covered by the builder’s risk, including theft of materials that will become a permanent part of the site, and damage from wind, hail and fire.

Items that will not become a permanent part of the structure like contractor’s tools, etc., are still covered by the contractor’s own insurance policies (and not the builder’s risk), but some scaffolding or temporary structures can be covered by builder’s risk.

Why is builder’s risk so important?

A builder’s risk policy is meant to cover the interests of the owner, contractors and all subcontractors that are working on a project. It’s important to have a builder’s risk policy on a project because it eliminates the question of who’s at fault on the job site if someone’s actions cause property damage to the structure.

For new construction (ground-up), builder’s risk is the most comprehensive coverage available to protect all parties who have a financial interest in the project. For renovation work, the existing structure is normally covered by the owner’s property policy, and often, the renovation work can also be covered as part of the standard property policy. If the property policy isn’t able to accommodate the renovation work in their policy form, a builder’s risk or installation floater can cover the renovation work until it’s accepted by the owner.

Does Buildertrend have options for builder’s risk insurance?

Yes. Buildertrend offers Builder’s Risk Insurance through SilverStone Group to give our customers easier access to this type of insurance. Buildertrend customers are able to receive competitive group rates. Reach out today to learn more!

About The Author

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Lizzie Long Lizzie Long is a Content Specialist at Buildertrend.

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