Also known as course of construction insurance, builder’s risk is a type of property insurance designed to protect buildings under construction. An essential part of protecting any construction project, deciding on the right amount and type of builder’s risk can be complicated. Our commercial insurance division works with contractors and businesses of all types, and will break down the basics of builder’s risk insurance and help build the right coverage for you. (see what we did there? 😉 )
Who Needs to Purchase a Builder’s Risk Policy?
A general contractor or property owner should purchase a builder’s risk policy for any new commercial or residential construction project, or significant home renovation or business renovation. Anyone with a financial stake in the construction project should consider builder’s risk coverage to protect their investment. Anyone involved in the project such as the property owner/s, contractors, subcontractors, designers and architects, lending institutions, rental companies, and project managers should be listed as named insureds on the policy.
What Does Builder’s Risk Insurance Cover?
Builder’s risk insurance typically pays for damage (up to coverage limits) for buildings under construction, building materials and equipment on a job-site, in transit to a job site, or temporarily off-site caused by:
- Fire or explosion
- Theft
- Lightning
- Vandalism
- Hail
- Vehicle or aircraft collision
Course of construction insurance can also help cover certain “soft costs” if the covered property damage causes the project to be delayed. These may include:
- Lost sales
- Real estate taxes
- Lost rental income
- Additional interest incurred on loans
What is Typically Excluded from a Builder’s Risk Policy?
Your McSweeney & Ricci risk manager will read through your builder’s risk policy with you and make sure you understand any policy limitations or exclusions.
Some common exclusions include:
- Wear & tear
- Intentional damage
- Employee theft
- Flooding
- Earthquake
- Wind
- Acts of war or terrorism, global pandemic
- Rust/corrosion
- Damages resulting from faulty design
- Mechanical Breakdown
- Damage due to poor workmanship or improper materials
For building projects in locations vulnerable to weather-related damage such as wind, earthquake and/or flood, an additional endorsement may be available to provide coverage.
When is the Best Time to Buy a Builder’s Risk Policy?
Purchasing a builder’s risk policy before the start of your construction project, will ensure you are prepared for any unexpected losses that could arise. Consider each phase of your project, taking an inventory of all the different equipment, materials, and other exposures that will be at the construction site, in transit or in storage. Choose broad coverage that applies to property at all locations, or tailor coverage to protect specific property and risks. A member of our skilled business insurance team can help you determine which type of coverage is right for your particular project needs.
How Much Builder’s Risk Insurance Do I Need?
The amount of builder’s risk insurance you purchase should be equal to the total completed value of the structure being built. (1) The total completed value should include building and design costs, building materials, overhead, and labor costs and should exclude the value of the land. Each construction project has different risk exposures, so your builder’s risk policy should be tailored to your unique needs. As your agent, McSweeney & Ricci will provide you with competitive quotes and can help determine the proper levels of coverage for your situation.
When Does Coverage Begin and End?
Builder’s risk insurance is a temporary policy that protects projects being built, as such policies can be written in terms of three months, six months, or 12 months. If the project isn’t complete by the end of the initial policy term, it can be extended (usually only one extension is allowed). A builder’s risk policy usually begins when the contracts get signed. However, when your builder’s risk insurance policy officially starts depends upon your specific policy provisions. Builder’s risk coverage typically ends when the project has been completed. However, your policy may end after the:
- Policy expires or is cancelled
- Building becomes occupied
- Building put to its intended use (2)
Just as with coverage beginning, when coverage ends depends on the conditions stated in your policy. Your dedicated risk manager can review your policy with you and make sure you understand the specific events that trigger the commencement and termination of your coverage.
Trust McSweeney & Ricci for Builder’s Risk Insurance in Massachusetts
With over fifty years of experience advising businesses and contractors of all types, McSweeney & Ricci can provide you with a customized builder’s risk insurance policy and complete business insurance to keep you protected. Our professional advisors know your industry and the issues affecting it and will help you prepare for and mitigate risk. If you do experience a claim, our in-house claims department walks you through each step of the way and will get you back to “business as usual” as quickly as possible. We offer conveniences such as in-house registry services and immediate issuance of insurance certificates. In addition, to business insurance, McSweeney & Ricci provides home insurance, car insurance, life insurance, cyber fraud insurance and much more.
For more information on Builder’s Risk insurance in Massachusetts, before your next project begins contact the business insurance experts at McSweeney & Ricci by calling (844) 501-1359 or request a free quote on our website.
Sources:
- “Understanding Builder’s Risk Insurance” by Juan Rodriquez 12/3/19 thebalancesmb.com
- What Is Builder’s Risk Insurance? | The Hartford
