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Whether you’re building a new multi-unit condominium or you’re renovating to expand the dining area in your restaurant, your building project is exposed to numerous risks. In a perfect world, construction projects are completed without interruption. However, it’s best to ensure the project is protected with a builder’s risk insurance policy.
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Sometimes referred to as course of construction insurance coverage, a builder’s risk insurance policy is a policy that covers the construction project during the building phase. Builder’s risk insurance covers new projects, renovations and rebuilds.
Considerations when creating a builders risk insurance policy:
Type of construction
Value of project and materials (size of project)
Security measures
Timeline - how long will this project take?
Contractor’s claims history
During construction, a property is exposed to different losses than other completed and occupied properties. That’s why it’s important to secure a builder’s risk insurance policy before starting any construction project.
A builder’s risk policy can cover losses arising from:
Lightning strikes
Fire
Theft and vandalism during construction
Wind and hail damage
Explosions
Should a devastating event occur during the build, a builder’s risk insurance policy can take care of:
Replacement of building materials
Physical damage to the property
Legal fees or architectural costs
Cost to remove debris
Construction projects can have varying costs associated with them, known as hard costs and soft costs.
Hard costs, also known as direct costs, generally cover the physical materials, supplies and labour required to finish a project.
Soft costs generally cover indirect costs associated with a project outside the physical construction, including real estate taxes, design work, developer’s fees, interest, accounting and legal fees, inspection fees and additional insurance costs.
Soft costs may not always be covered under a standard Builder’s Risk policy, an endorsement may be needed that specifies the soft costs covered in the event of a loss.
Should a loss occur, the expenses from soft costs can quickly add up. For example, say a fire broke out in a subdivision development, causing three single detached homes to burn. The site may need to be resurveyed. Insurance costs could increase if the term needs to be extended. The engineers and architects may charge a fee to redraw plans. New permits may be needed, which may incur legal fees.
Learn more about whether the soft costs are insured for your next construction project by speaking to a BrokerLink insurance advisor.
When insuring your project, your insurance limit is the total value of the project on the last day of construction. For example, the value of the project the day the construction is completed.
Contractors, building owners, engineers and project managers can all purchase a builder’s risk insurance policy.
Blanket builder’s risk coverage allows contractors to insure for an entire year instead of insuring each construction project. This type of coverage can minimize some of the administrative work that comes with each individual project. Talk to a BrokerLink commercial insurance expert to know whether blanket builder’s risk coverage is right for the type of work you do.
You can also get wrap-up liability coverage to protect against claims caused by subcontractors.
Wrap-up liability coverage works in a way similar to a commercial general liability policy, however, instead of applying to a specific legal entity, a wrap-up liability policy applies to a specific project and covers the liability for the owner, general contractors, and sub-contractors involved in the project. It does not impact the company’s general liability policy, but instead acts as protection to keep the general liability policy clear of claims.
Turning your dream into reality involves a lot of time and money. A builder’s risk insurance policy can help protect construction projects big or small. A good policy will help ensure that the time you take planning and coordinating isn’t all lost should a claim occur. BrokerLink is here to help you protect what is most valuable, so you can focus on building your dreams.
Commercial property insurance provides coverage for your business and its contents or physical assets, as well as exterior fixtures, such as a fence or outdoor signs. It can also help cover your repair or replacement costs if your business property is damaged or destroyed as a result of a covered loss. Property under major renovation or construction are generally excluded from commercial property insurance. Builder’s risk insurance is a separate policy, created specifically to cover your property for the construction project at hand.
If you are a contractor, you should have liability insurance coverage for your contracting business. When you start a new construction project, you should call your insurance broker to have them add a builder’s risk policy to cover your property at this specific project.
Builder’s risk insurance does not cover damages to the property before the project begins or after project completion. Construction must be underway for coverage to kick in. It also may not cover:
The contractor’s tools and equipment (which should be covered under the contractor’s own policy)
Faulty or improper workmanship, materials and design
Bylaws
Loss caused by stoppage of work or by interruption of construction
Earthquake and flood
Every policy is different. Speak to your broker to understand what your builder’s risk insurance policy entails.
