What Are Soft Costs in Builder’s Risk Insurance?

Buildings under construction or renovation require a Builder’s Risk policy. This specialized type of Property insurance protects an individual’s or organization’s insurable interest in the cost of constructing the building against physical damage or loss from covered perils. The temporary policy is typically written for 3, 6, 9, or 12 months.

Generally speaking, the exposures in a Builder’s Risk policy include hard and soft costs. Hard costs include physical property such as the existing structures, new construction, foundations and underground property, scaffolding, temporary buildings or structures, fencing, etc. It also includes tangible assets, such as materials, fixtures, labor, equipment, etc., associated with a construction project. Causes of loss include severe weather, fire, vandalism, and theft, among others.

However, when property damage occurs, there are other costs, too. Project delays may impact other expenses, including fees for rebuilding or extending permits and licenses and additional interest on a construction loan. These additional or continued expenses, known as soft costs, are incurred due to construction delays caused by a covered loss. They can add up quickly, jeopardizing the project’s viability.

Soft Costs Covered Under Our Builder’s Risk Policy

It’s important to note that Builder’s Risk policies are not the same and often cover soft costs differently. At Distinguished, our Builder’s Risk policy includes the following soft costs:

  • Permit and reinspection fees
  • Commission or fees for lease renegotiation
  • Financing fees
  • Legal fees
  • Real estate and property taxes
  • Insurance premiums
  • Architect, engineer, and consulting fees
  • Advertising and promotional costs
  • General administrative expenses
  • Additional security costs

Our policy will pay for the soft costs for the actual loss sustained up to 10% of the project’s completed value, which represents the policy limit. It’s important that insureds understand that itemized soft costs are covered only when they are the direct result of a covered loss (e.g., fire, vandalism, etc.) under the Builder’s Risk policy.

In addition, it’s critical that insureds accurately determine the total insurable value of the building so that it is properly covered along with the corresponding sublimit for soft costs.

Placing Builder’s Risk Insurance with Distinguished for Your Clients

Partnering with Distinguished for your Builder’s Risk clients provides you with several benefits, including:

  • Online submission: Our online portal allows you to easily submit business. For qualifying risks, you can bind and quote online.   
  • No volume commitments: Whether it’s one or 100 clients, we’re happy to work with you. 
  • Superior claims: Our dedicated claims team is ready to quickly and efficiently handle claims and questions your clients have.   
  • Easy policy transitions: If you need to transition to a Vacant Property or Umbrella policy, your client will continue to get the coverage their assets require. 

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.  

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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