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Builder’s Risk Insurance

Builder's risk insurance can be defined as coverage that protects a person's or organization's insurable interest in materials, fixtures and/or equipment being used in the construction or renovation of a building or structure should those items sustain physical loss or damage from a covered cause.

As buildings are being constructed, they can be subject to a variety of risk such as fire, winds, theft and vandalism to name a few.  Builder's risk insurance usually covers against losses due to fire, vandalism, lightning, wind, and similar forces.

Normally, it does not cover earthquake, flood, acts of war, or intentional acts of the owner.  Coverage is typically for the construction phase only, and will terminate when the project is completed and ready for use or occupancy.  While normally purchased by the owner of the project, insured’s can also be lending institutions or the contractor or contractors that are performing the work.

In addition to the structure, coverage also may include tools and other materials which are kept onsite.  However, heavy equipment and machinery are not normally covered and may require a separate rider or policy.  Materials in transit may also be covered in the policy.

As a contractor, it is good to sit down with a licensed agent who specializes in builder’s risk policies.  For large or specialized projects, it is important to also have an attorney review the contract and requirements of the builder’s risk insurance. 

Your state Department of Insurance can be a good resource as well.  Whether you’re providing the coverage, or the owner is, it’s good to have a relationship with an insurance agent should you need to provide a referral to the client for builders risk insurance.