Builder's Risk Insurance: Definition, Coverage And Cost - Forbes
Builder's risk insurance provides property coverage for buildings and structures that are under construction. If you're a builder or a commercial property owner, you could face considerable monetary loss if something goes wrong with the construction of a building and you don't have builder's risk insurance.
Here's what you need to know about builder's risk insurance, what it covers and what it doesn't cover.
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What Is Builder's Risk Insurance?
Builder's risk insurance covers property and construction materials during a project. It's also called "course of construction insurance."
Builder's risk policies are available for new construction projects, remodeling and installation work. Projects are classified as either commercial or residential risks.
Who Needs Builder's Risk Coverage?
Types of people and businesses who can benefit from builder's risk insurance include:
- Architects
- Builders
- Building owners
- Development and investment companies
- Engineers
- General contractors
- Lenders
- Subcontractors
What Does Builder's Risk Insurance Cover?
Builder's risk insurance protects builders against multiple types of problems, including:
- Fire
- Lightning
- Hail
- Explosions
- Theft
- Vandalism
- Hurricanes and other "acts of God"
A builder's risk policy may cover:
- Buildings and structures that are under construction, including temporary storage buildings, fencing and scaffolding
- Equipment, such as repair of damaged equipment, as long as the equipment is covered under the policy
- Materials and supplies being used
- Constructions signs, trees and plants
- Valuable papers such as blueprints, and electronic data
- Labor
- Ordinance and law costs, or the increased cost to repair or rebuild due to building codes and laws at the time of the loss
Builder's risk policies may also cover the following "soft" costs that result from construction delays:
- Additional interest on loans
- Lost sales income
- Real estate taxes
- Rental income
What Does Builder's Risk Insurance Not Cover?
Not everything is covered under a builder's risk insurance policy. For example, earthquakes and floods are generally not covered, but you can buy additional insurance for those problems. Here's a short roundup of other common exclusions:
- Acts of terrorism and war
- Damage due to a faulty design
- Employee theft
- Mechanical breakdowns
- Rust and corrosion
- Wear and tear
Be sure to check a policy's exclusions before buying it. You want to be aware of what costs you'll be paying if the worst happens.
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