Builder’s Risk Insurance: What Your Clients Need to Know
The moment construction begins, a property is at risk of damage. Whether it’s theft, accidental fires, floods, or more, there can be a number of major risks to these buildings.
That’s why it’s crucial that any property undergoing construction, improvements, or renovations has a comprehensive Builder’s Risk insurance policy. This kind of insurance policy is specially designed to provide coverage for under-construction buildings. This policy not only covers damages to the building itself but also helps cover the costs of damaged building materials, costs associated with on-site cleanup after a disaster, and much more.
However, communicating the risks naturally inherent in construction is never easy, especially when you’re not an expert in what happens on job sites. With this guide and the Builder’s Risk e-book, you’ll be able to explain Builder’s Risk insurance to people in the construction industry in a way they’ll understand. You’ll also have a better appreciation of what risks homeowners, contractors, and developers face so you can offer them coverage suited to their unique projects and circumstances.
Which Projects Need Builder’s Risk Insurance and Why?
Builder’s Risk Insurance is necessary on any project where something is under construction, and the cost of that construction going wrong would be a financial hit for the invested parties.
Specifically, a Builder’s Risk Insurance Policy covers three broad groups of construction projects:
- New construction: The building of an entirely new commercial property, building, or home from the ground up.
- Remodeler’s Risk Projects: Changes to an existing structure that requires skilled labor.
- Betterment projects: Internal improvements by tenants or condo owners, such as when they are doing kitchen remodeling or floor replacement.
It’s important to note that a coastal property might need specialized Coastal Builder’s Risk insurance. Many Builder’s Risk policies will not accept the risk that comes with coastal construction, which is why these projects will need a more specialized insurance program.
If you aren’t sure if Builder’s Risk is suitable for your clients, contact one of our insurance experts. They can walk you through the ins and outs of our policies and help you understand what kind of insurance coverage would be best for your client’s situation.
What Does Builder’s Risk Insurance Cover?
A Builder’s Risk policy covers your clients against a number of exposures that are common on job sites. Although specific coverages will vary from policy to policy, at Distinguished, our Builder’s Risk insurance program covers:
- Acts of God: Covers weather events outside of human control.
- Vandalism: Covers damages caused by people intentionally trying to harm the job site, including things like broken glass or graffiti.
- Theft: Covers the cost of replacing covered items that were stolen from the job site.
- Property damage: Covers damages to the building being constructed or renovated.
- Equipment: Covers damaged or stolen equipment used on the job site.
- Soft costs: Covers additional expenses caused by a covered claim that are not related to building materials, equipment, or other hard costs. These soft costs would include additional reinspection fees, increased tax burdens, and insurance premiums.
- Materials: Covers the loss of building materials either on the site or in-transit between covered sites.
- Premises liability claims: Covers legal expenses related to any trips and falls that happen on the site.
Builder’s Risk also extends beyond the building itself to provide coverage to the entire extended worksite. This means a Builder’s Risk policy will cover damages to:
- Other existing structures that are on-site
- Building materials used in the construction
- Off-site property materials that are in transit to the job site
- Job site property like scaffolding or temporary structures
Finally, Builder’s Risk policies can be personalized to cover the specific needs of the insured. These additional coverages extend the Builder’s Risk policy to cover less common issues that not every project will need or to create extra peace of mind.
These include:
- Blueprints and construction documents
- Sewer backup
- Temporary storage location
In short, Builder’s Risk covers construction sites — the buildings on them, the materials that make them, and the costs incurred when either of those is damaged. As great as Builder’s Risk is, it’s intended to complement other insurance policies, so it doesn’t cover everything.
What Doesn’t Builder’s Risk Insurance Cover?
A Builder’s Risk insurance policy doesn’t cover problems that occur to or because of the employees on the job site.
In other words, if a supervisor is walking off the site with copper wires or a worker loses a finger, those damages won’t be covered. It also doesn’t cover damages caused by terrorists or a foreign government.
To be more specific, Builder’s Risk doesn’t cover:
- Employee theft
- Bodily damage to employees working on the job
- Intentional damage
- Manufacturing defects
- Terrorism, nuclear attacks, or military actions
Instead, most of these exclusions should fall under a contractor’s general liability insurance. So, your client and their contractors should already have the appropriate insurance policies in place to keep the project fully insured.
Will Builder’s Risk Cover Vacant or Unoccupied Properties?
Generally speaking, most Builder’s Risk policies will only cover a vacant or unoccupied property for a month or two.
For instance, Distinguished’s Builder’s Risk policy will cover properties for up to 45 days if delays have forced the start of construction back. However, past this point, you’ll need to switch to a Vacant Property insurance policy for it to remain covered.
If one of your client’s properties needs Vacant Property coverage, Distinguished offers comprehensive policies in 3, 6, and 12-month terms. Plus, we can offer most clients bindable quotes instantly online so that your clients’ projects remain covered.
Learn more in our Guide to Unoccupied Building Insurance or our Vacant and Unoccupied Building Insurance Program page.
How Much Does Builder’s Risk Insurance Cost?
The cost of Builder’s Risk depends a lot on the project’s specific circumstances, but a good rule of thumb is about 1-5% of the total cost of the new build or renovation.
Three main factors determine the bulk of the cost for BR:
- The total insurable value (TIV) of the building
- The specific exposures your client wants to be covered
- Unique challenges and risks inherent with the project
For instance, if your building is a coastal property, that location has inherent risks that a building elsewhere would not. It’s not just where the project is located, either. The kinds of construction materials used will impact the policy’s price, with combustible building materials like wood costing more than concrete.
Further, zones prone to natural disasters, such as earthquakes or floods, may require additional policy extensions to qualify for Builder’s Risk coverage, which will add to the cost of the policy.
All of this is to say the cost of a Builder’s Risk insurance policy is hard to pin down without the specifics. If you or your client has more questions, we created this in-depth guide to Builder’s Risk costs to shed more light on what you can expect to pay. Otherwise, contact our team or start on an online application to get a quote today.
Who Pays for Builder’s Risk Insurance and When?
The person who has the largest financial stake in the project should be the one who pays for the Builder’s Risk insurance policy.
Who this person is will differ from project to project. For instance, this could be:
- The property owner
- The general contractor for the project
- The property developers
- The financial backers of the project
Although the person or group with the largest financial stake should purchase the Builder’s Risk insurance policy, all other stakeholders should be named as insureds as well. So even if the property owner is taking out the policy in their own name, they should also name their general contractor as an insured.
Once it’s been determined who will purchase the Builder’s Risk policy, it’s important to know when that policy should be purchased. Ideally, once the contract is finalized, the Builder’s Risk policy should be purchased and put in place so coverage seamlessly begins as construction starts.
However, as long as coverage is purchased before construction begins, then there should be no risk of a lapse in coverage.
Why Brokers Should Partner With Distinguished for Builder’s Risk Insurance
Brokers should partner with Distinguished for all of their Builder’s Risk clients because we offer years of experience, special form, ease of use, and competitive pricing.
Plus, you get access to a program that includes:
- Online submission: Our online portal allows you to easily submit business, and for qualifying risks you get the ability to bind and quote online.
- No volume commitments: Whether it’s 1 or 100 clients, we’re happy to work with you.
- Flexible premiums: Premiums are a sticking point for many customers — that’s why our team is willing to work with you to find a policy premium that works for their budget.
- Superior claims: Our dedicated claims team is ready to handle any claims and questions your clients might have quickly and efficiently.
- Easy transitions: Whether you need to transition to a Vacant Property or an Umbrella policy, we can make sure your client continues to get the coverage their assets require.
Plus, with Distinguished, you can get coverage for renovations, improvements, or construction projects for your residential, commercial, and mixed-use clients all in one place.
All you need to do is register with us, and you can start getting access to this exclusive, convenient, and comprehensive Builder’s Risk program.
Get a Bindable Quote for Your Construction Clients Today
To access Distinguished’s Builder’s Risk program, you’ll first need to register your brokerage with us so you can access our Broker Portal. From the portal, simply add your client’s details, and in most cases, we’ll be able to send you a bindable quote instantly. In all other instances, we’ll need to manually review the submission, so you’ll receive a quote within a day or two.
If you have any questions about how to submit business through our portal, feel free to reach out to us or take a look at our online submission tutorial.
To learn more about Builder’s Risk insurance and our Builder’s Risk offering, take a look at our Builder’s Risk eBook. This resource will help you learn about the risks involved in construction and help brokers and clients alike learn more about what Builder’s Risk is, who needs it, what it covers, and so much more.
Distinguished’s Builder’s Risk Insurance FAQs
Every Builder’s Risk policy is a little different. Here are the answers to some commonly asked questions we get about our Builder’s Risk policies. Don’t see what you’re looking for? Check out our dedicated Builder’s Risk FAQ page for more answers.
Where Is Distinguished’s Builder’s Risk Policy Offered?
Distinguished offers its Builder’s Risk policies across the United States, except in Florida, Hawaii, Kentucky, and Suffolk County, New York.
This means we offer our policies in major insurance markets like:
What Is the Max TIV for Your BR?
Our max TIV depends on the kind of project being insured:
- New Construction & Remodelers – TIV up to $20M
- $7.5M Maximum TIV for Frame
- $5M Maximum TIV for Betterments only
- $20M Maximum TIV for All other construction
- Betterments Only – TIV up to $5M. For condo owner or tenants that need coverage for improvements made in their unit
For Coastal Builder’s Risk, the max is:
- New Construction: TIV up to $20M (Frame brand new construction up to $6.5M TIV)
- Remodeler’s Risks: TIV up to $5M
- Betterments Only: TIV up to $5M
For more information on coverage limits, look at our Builder’s Risk product page.
Are Soft Costs Included?
Yes, soft costs are included up to 10% of the project’s completed value for Actual Loss Sustained.
What Is the Difference Between Hard Costs and Soft Costs?
Hard costs are expenses related to tangible items. So, this would include things such as building equipment, the property itself, and building materials.
Soft costs are related to intangible expenses. In this case, soft costs might include taxes, permit costs, insurance costs, and more.
What Is the Difference Between Hard Costs and Soft Costs?
Hard costs are expenses related to tangible items. So, this would include things such as building equipment, the property itself, and building materials.
Soft costs are related to intangible expenses. In this case, soft costs might include taxes, permit costs, insurance costs, and more.
About Distinguished Programs
Distinguished Programs is a leading national insurance Program Manager providing specialized insurance programs to brokers and agents with specific expertise in Fine Art and Collectibles, Environmental and Construction Professional, Executive Lines, Inland Marine, Real Estate & Builder’s Risk, Community Associations, Surety, Hotels, and Restaurants. Property and Liability products are distributed through a national network of agents and brokers. Serving the same core markets and partnering with the most stable and reputable carriers, Distinguished’s high-limit Umbrella programs remain the clear choice in its area of specialty for superior coverage, competitive pricing, and attentive service. Through thoughtful innovation, stemming back to 1995, Distinguished Programs fosters growth and opportunities for its brokers, carriers, and employees.
View a full list of our programs and submit business with Distinguished.
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