Builder’s Risk Insurance for Homeowners: A Comprehensive Guide
Note: Distinguished Programs no longer offers Builder’s Risk or Vacant Building insurance. Explore our other programs for tailored solutions.
Imagine a homeowner investing their life savings into their dream home renovation, only to watch it go up in flames before completion. It’s a devastating reality for far too many. From 2017 to 2021, local fire departments responded to an average of 4,440 fires annually in structures under construction, resulting in tragic losses of life and staggering property damage averaging $370 million per year.
Although fire is one of the top exposures an under-construction building faces, it’s not the only one. Theft, leaks, and mold can all turn a simple home improvement project into a financial nightmare.
Homeowners looking to undertake a renovation, betterment project, or new construction face several unique risks that standard homeowners insurance may not cover. That’s where Builder’s Risk insurance comes in. This specialized policy protects homeowners from a wide range of perils, ensuring that they can rebuild and recover if disaster strikes.
In this comprehensive guide, we’ll explain Builder’s Risk insurance for homeowners, detailing what it covers, who needs it, and why it’s an essential safeguard for any homeowner undertaking a significant construction or renovation project.
Will Homeowner Policies Cover Insurance Claims During Renovations or Construction?
No, most homeowners insurance policies in the US do not provide adequate coverage for homes undergoing renovations or construction. Typically, home insurance policies are designed to protect completed homes against common exposures like fire, theft, and weather damage. They often exclude or limit coverage for structures that are under construction or being renovated.
This means that if a homeowner relies solely on their home insurance policy during a renovation or construction project, they may face significant financial risk if something goes wrong. For example, if a fire destroys the newly framed addition or thieves steal expensive building materials, the homeowner could be left to cover the losses out of pocket.
Given these gaps in coverage, it’s clear that homeowners need a specialized insurance solution like Builder’s Risk when undertaking these kinds of projects.
What is Builder’s Risk Insurance?
Builder’s Risk is a specialized type of property insurance that covers residential and commercial buildings while they are under construction, renovation, or improvement. The policy protects the homeowner’s financial interest in the project against various exposures, such as fire, theft, vandalism, and certain weather events.
One key advantage of Builder’s Risk insurance is its flexibility. Policies can be purchased for specific time increments, usually 3, 6, or 12 months, depending on the projected duration. This flexibility allows homeowners to tailor their coverage to their specific needs and timeline, ensuring they have protection for the entire construction process without paying for coverage they don’t need.
Who Should Have a Builder’s Risk Insurance Policy?
Any homeowner planning a substantial renovation, remodel, or new construction should consider purchasing a Builder’s Risk policy. This includes projects like:
- Building an entirely new home
- Major additions or structural changes to an existing home
- Gut renovations or extensive remodeling
- Major interior improvements
Essentially, if the project involves significant alterations and the cost of something going wrong would be a major financial setback, Builder’s Risk insurance is a smart investment.
What Does Builder’s Risk Insurance Cover?
A Builder’s Risk policy offers homeowners comprehensive protection against a wide range of exposures commonly encountered during residential construction and renovation projects. While specific coverages may vary between policies, a typical Builder’s Risk insurance plan includes:
- Natural Disasters: Covers damage caused by weather events beyond human control, such as hurricanes, tornadoes, or severe storms.
- Vandalism: Protects against intentional damage to the property, including vandalism, graffiti, and glass breakage.
- Theft: Reimburses the homeowner for the cost of replacing stolen materials, equipment, or fixtures.
- Property Damage: Covers direct physical damage to the home under construction or renovation.
- Soft Costs: Reimburses the homeowner for additional expenses caused by a covered loss, such as increased living expenses, architectural fees, or permit fees.
- Materials Coverage: Protects building materials and supplies both on-site and in transit to the construction site.
- Liability Protection: Covers legal expenses and damages if someone is injured on the construction site and files a lawsuit against the homeowner.
While Builder’s Risk insurance offers broad protection, it’s important to note that it does not cover everything. For example, it typically does not insure against faulty workmanship, design defects, or normal wear and tear. It also does not provide coverage for workplace injuries, which are typically addressed through the contractor’s workers’ compensation insurance.
How Much Does Builder’s Risk Insurance Cost?
The cost of Builder’s Risk insurance depends on the specifics of the project, but a general estimate is 1-5% of the construction budget.
Key factors that impact the price include:
- The type of construction
- The building materials used
- The location of the site
- Deductibles
If you’d like to get a quote for your client, please sign up with us and submit your business through our online portal.
Partner With Distinguished for All of Your Builder’s Risk Clients
When it comes to protecting your homeowner clients during their renovation or construction projects, partnering with Distinguished offers numerous advantages. With years of experience, a user-friendly platform, and competitive pricing, Distinguished is well-equipped to meet the unique needs of your clients.
By partnering with Distinguished, you gain access to our robust Builder’s Risk program that includes:
- Streamlined Online Submission: Our online portal simplifies the submission process, allowing you to submit business quickly and easily.
- Flexible Minimum Requirements: Whether you have a single client or a hundred, Distinguished is committed to working with you. We have no minimum volume commitments, ensuring that you can provide top-tier coverage to all of your clients.
- Customizable Premiums: We understand that price is a critical factor for many homeowners. That’s why our team will work with you to find a policy premium that fits your client’s budget without compromising on coverage.
- Exceptional Claims Handling: In the event of a claim, our experienced team will provide prompt, efficient service. We’ll work diligently to address any claims or questions your clients may have, helping to minimize disruptions to their project and their lives.
- Seamless Policy Transitions: As your client’s needs change, Distinguished makes it easy to transition to other essential policies, such as Vacant Property or Umbrella coverage. This ensures continuous, comprehensive protection for your client’s assets, no matter what stage their project is in.
Distinguished offers coverages for a wide range of renovation, improvement, and construction projects, including those for commercial and mixed-use properties. Our versatile Builder’s Risk program is designed to be a one-stop shop for all of your clients’ construction insurance needs.
Register With Us Today
Getting started with Distinguished is quick and easy. Simply register your brokerage with us to gain access to our user-friendly Broker Portal. Once you’ve logged in, you can input your homeowner client’s details, and in most cases, you’ll receive a bindable quote within minutes.
For more complex submissions, our experienced underwriters will review the information and provide a quote within 1-2 business days.
If you have any questions or need assistance navigating the submission process, our knowledgeable team is here to help. Feel free to reach out to us directly or consult our step-by-step online submission tutorial for more information.
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, 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.
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