A Broker’s Guide to Builder’s Risk Insurance in California

Picture this: a panoramic drive through the picturesque landscapes of Southern California – from the elegant neighborhoods of Brentwood and Pacific Palisades to the opulence of Beverly Hills and the enchanting vibes of Laguna Nigel and Rancho Santa Fe. As you venture further up north, you’ll find yourself in the captivating beauty of San Mateo. Everywhere you look, new home constructions and dazzling remodels are springing up.

But beneath the surface lies a critical concern: safeguarding these ambitious projects from unforeseen risks. Enter Builder’s Risk insurance. This insurance provides comprehensive coverage during the building process, protecting against natural disasters and unexpected accidents, and preserving the vision from the ground up.

Considering the potential risks inherent in any construction or remodel undertaking, having Builder’s Risk insurance in California is not just a luxury but a strategic decision to mitigate potential losses and ensure a successful outcome for your project.

What Is Builder’s Risk Insurance?

Builder’s Risk insurance is a type of specialized Property insurance that protects buildings and structures under construction or undergoing renovation from physical loss or damage. It is temporary coverage, with a policy typically issued for three, six, nine, or 12 months.

A Builder’s Risk policy protects not only an individual’s or organization’s insurable interest in the cost of construction but also the materials, fixtures, and equipment used on the project, as well as temporary structures used on the premises.

What Does a Builder’s Risk Policy Cover?

It’s important to note that Builder’s Risk insurance differs from one insurer to another. Therefore, an insured’s understanding of the policy details is critical. Basically, Builder’s Risk Insurance is designed to cover the entire structure for a new build (single-family home or office building, for example) and remodeling and renovation projects such as a room addition or extension. Builder’s Risk insurance covers fire, lightning, hail, wind, theft, and vandalism. A policy can also pay for protective measures an insured undertakes to mitigate further damage following a loss, such as debris removal and pollutant cleanup.

The following property types are covered in the policy:

  • Current Structures
  • New Construction
  • Foundations and Underground Property 
  • Other Property: Scaffolding, temporary buildings or structures, fencing, antennas, and materials stored outdoors or outside of a predetermined distance from the project

Depending on the policy form, additional coverages and sub-limits may be included, such as Ordinance or Law (the cost to bring the property up to current codes after a loss, for instance), Sewer Backup, Temporary Storage Location, and Blueprints and Construction Documents, among others.

Liability may also be available with Builder’s Risk insurance. Distinguished is one of the few markets that include Liability insurance as long as the named insured is other than the contractor.

The premium for Builder’s Risk insurance is calculated based on several factors, including the cost of the project; policy limits, construction type; geographic location, policy term, and deductibles.

Insurance to Value in Builder’s Risk Insurance

In new construction, if the cost of the project increases, it’s important for clients to notify their insurance agent and insurer so that the value of the project is accurately reflected in the Builder’s Risk policy. 

When securing a policy for a remodel, the insured should also provide the correct valuation of the existing structure to properly protect it during renovations. In addition to ensuring that the valuation of the existing building is correct, proper valuation of the betterments (internal improvements) is also required. In the event of a loss, a coinsurance penalty could apply, and the insured will incur out-of-pocket expenses if the improvements are undervalued.

Make Sure the Project Starts within a Specific Time Frame

Builder’s Risk insurance, in general, requires that work on a remodel begin within a certain time after the policy’s inception date. If, for some reason, there are delays and work does not begin, be sure to speak to the insured so that he or she understands how the vacancy clause within the policy works. If there is a claim after a specific time period with no work performed, coverage may not apply. The longer the structure sits without any work being done, the higher the exposure. A vacant building invites squatters with a greater risk of vandalism in addition to fire and water damage exposures.

Preparedness Is Key with Builder’s Risk Insurance in California

Wildfires are a huge concern in California. An underwriter will look at a risk’s score and other factors to determine eligibility for the program. Newer building codes and requirements regarding the amount of space around homes that is clear of trees and brush and the materials used for roofs, siding, vents, decks, and fences have made newer homes in California built to code 40% more likely to survive a major wildfire, according to the National Bureau of Economic Research.

California has also experienced heavy rains and snow throughout the 2022-2023 winter season. Insureds should have preparedness plans in place to mitigate losses to new construction and property undergoing remodeling and renovations. For example, if there are heavy rains in the forecast, use sandbags to minimize water damage in the building from flooding. Move any uninstalled materials (lumber) to a secure location. Additionally, plan for water and debris removal after a storm. Have a sump pump to remove water quickly from a flooded job site. Remove hazardous chemicals from the job site before a severe weather event. These are just some of the measures that should be on a preparedness list.

How Distinguished Can Help with a Builder’s Risk Policy in California

Distinguished Programs offers Builder’s Risk insurance in California for new construction, renovations, and betterments. We provide the following limits:

  • Frame up to $7.5M
  • All other construction up to $20M

For Coastal Builder’s Risk:

  • 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

Submit Builder’s Risk Business Online

You can submit your business through our online submission portal. Simply register your brokerage, go to our Broker Portal, and spend a couple of minutes adding in the insured’s details, and we’ll get back to you with a quote. If your clients like what they see, you can bind the policy right there through the same online portal.

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, 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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