If you’re building a new home or making extensive renovations on an existing structure, you’ll need builder’s risk insurance to cover the property during the course of construction.
What is Builder’s Risk Insurance
Builder’s risk insurance, also known as course of construction insurance, is a specially designed policy that provides coverage for commercial and residential buildings during the construction process, including ground-up projects and renovations.
Who needs Builder’s Risk coverage?
Anyone with a financial interest in the construction project needs builder’s risk insurance.
What types of property does Builder’s Risk Insurance cover?
A basic builder’s risk insurance policy helps cover buildings and structures under construction. It also helps protect construction materials, supplies and equipment.
What does Builder’s Risk Insurance cover?
A builder’s risk insurance insurance policy helps protect your construction projects from certain kinds of property damage. It can also help cover additional soft costs, or expenses not directly related to construction, if property damage causes a delay. This can include lost sales, rental income, loan interest, real estate taxes.
Builder’s Risk Insurance for homeowners
If you’re building a new home or making extensive renovations on an existing structure, you’ll need builders risk insurance to cover the property during the course of construction.
How much does Builder’s Risk Insurance cost?
Every builder’s risk insurance policy is different, so costs vary depending on what you need. On average, a builder’s risk policy can vary between 1% and 5% of the total project value.
Builder’s Risk vs. Homeowners Insurance
Homeowners insurance is intended for completed, occupied homes, while builder’s risk insurance is designed for homes under construction.
A house that’s being built from the ground up is exposed to different risks than a fully enclosed and occupied home, and therefore will require a more specialized form of insurance.
Homeowners insurance protects your home and contents, provides coverage for additional living expenses, and offers liability protection in case someone is injured on your property. Builder’s risk insurance, on the other hand, covers the property while it is under construction and may not include personal liability protection.
Who is responsible for acquiring Builder’s Risk Insurance?
The particulars of who is responsible for providing which type of insurance will depend on the construction contract. Your builder will likely have general liability insurance to cover any liability issues related to the build, but it’s not always their responsibility to buy the builder’s risk policy as well.
If your general contractor doesn’t provide builder’s risk insurance, then it’s on you to ensure the project is adequately covered in the event of property damage or theft. If you’re financing the build with a construction loan, your mortgage lender will likely require proof of a builder’s risk policy throughout the course of construction.
How long of a term do I need to purchase?
Builder’s risk policies are available for 3, 6, 9, or 12 month terms, and can be renewed until a project finishes. The length of your builder’s risk policy term will depend on the scope of the construction project. If you’re doing a renovation or adding a room onto your home, you may only need a three-month term, while construction on a new home may require a twelve-month term.
The Bottom Line
It’s important to work closely with an agent that has experience with builder’s risk. Every project has different risks, so you’ll need a policy that addresses your unique needs. The seasoned agents at Forest Insurance can help you choose the right amount of coverage, get you a quote, and answer any personal or commercial insurance questions you might have. Contact Forest Insurance at (708) 383-9000 or visit www.forestinsured.com.
