Builders Risk Insurance

Insights 101 | Builder’s Risk explainer

Risk happens. And that’s why builders risk insurance is specifically designed to cover property during the period of construction, including renovation and repair that is typically is purchased by either the property owner or general contractor.

It’s needed because most commercial property policies will exclude or null and void coverage if major renovations or construction to the building is above a certain threshold and not fully/properly disclosed to the incumbent property insurance company.

There are additional risks and responsibilities inherent in this type of work that a typical property policy is not designed or priced to cover.

All parties that have property involved in the project should be named in the insurance policy. This may include the owner, contractor, subcontractors, the financial institution funding the project and, in some cases, the architects and engineers too.

What to know about coverages in builders risk insurance policies…

When purchasing construction insurance, one of the issues often overlooked is the policy period.

Commencement of builders risk insurance coverage. A builders risk policy provides coverage for property in the course of construction, renovation or repair.

But at what point does construction renovation or repair begin?

  • Typically, contracts require that building construction insurance be provided for the duration of the contract period.
  • The lender may specify the inception date.
  • Be sure to review the insurance policy provisions to determine whether there are restrictions on when coverage begins.

So what happens when a builder’s risk policy expires?

Determining when coverage terminates can be equally problematic. Building construction insurance policies can contain provisions that terminate coverage prior to policy expiration.

The provisions typically state that Building construction insurance will end at the earliest of the following:

  • The policy expires or is cancelled.
  • The property is accepted by the purchaser.
  • Your interest in the property ceases.

Careful planning is the foundation for a smooth construction project, which includes the best builders risk coverage.

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