Builder’s Risk insurance policies protect the construction project from the ground up to completion. The coverage protects not only the physical structure but also provides financial protection for the owner, builder, lending institution, subcontractors and material suppliers. The coverage incorporates materials, fixtures and equipment to be installed. It can also be extended to cover tools on the jobsite as well.
The Builder’s Risk form is flexible and can be underwritten to meet the needs of all parties involved in the project, municipal or private. These needs will vary by the nature of the construction project, its value and any contractual obligations. It can include business income and extra expense coverage, losses due to earth movement or flood, increased costs due to an ordinance or law and system testing.
There are many extensions and variations of coverages to the policy. Coverage may be extended to include the soft costs that arise when a covered loss causes a delay in the project. Some examples of soft costs include lost sales or rental income, interest on loans, taxes, and other expenses. These financial concerns must be considered when purchasing a policy.
Extensions are also purchased for scaffolding, construction forms and temporary structures; debris removal and disposal in the event of a loss; and pollutant cleanup. Coverage may also be available to cover the cost of upgrading a construction site to meet higher “green" environmental standards.
Additional interests to be named on the policy may include any person or company with a financial interest in the construction project such as the property owner as well as the general contractor and subcontractors. If the project is being financed, the lender will require coverage and have to be listed as an insured.