Builder’s Risk Insurance

What Does Builder’s Risk Insurance Mean?

Builder’s risk insurance is a type of property insurance designed to cover buildings or projects against damages during construction. Typically, the policy becomes invalid once the building is completed or occupied. For residential projects, owners often arrange homeowners insurance for new construction to take over once the home is move-in ready.

It is also referred to as course of construction insurance.

Insuranceopedia Explains Builder’s Risk Insurance

Builder’s risk insurance may cover damage to the property, including construction materials, machinery, equipment, scaffolding, landscaping, and more, due to perils such as theft, vandalism, wind, fire, hail, and lightning. It may also cover labor costs and other damages resulting from negligent workmanship or defective materials. The policy is usually bought by the property owner or the general contractor running the project, who will also need to account for their own general contractor insurance costs on top of it.

Exclusions include employee theft, earthquakes, water damage, war, government actions, mechanical breakdowns, voluntary parting, and damage to property exposed to the weather while outdoors. This type of policy does not cover liability risks, accidents on the project site, or damage to other people’s property. To fill those gaps, contractors usually carry separate general liability insurance.