Builders Risk Insurance

Video: Builders Risk Overview
Video: Builders Risk Overview
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Whether you’re new to course of construction insurance or a seasoned professional, you’ve come to the right place to elevate your knowledge of builders risk insurance. 

The basic concept of builders risk insurance is relatively simple to learn, even for the newest insurance professional. With more than 45 years of experience as the exclusive administrator for the Builders Risk Plan insured by Zurich, we’ll teach you the basics here to help you confidently sell and service policies for new construction, remodeling and installation projects.

What is builders risk insurance?

In the simplest terms, builders risk insurance (also known as course of construction or inland marine coverage) insures a structure while under construction.

A builders risk policy can cover a variety of projects, offering standard coverages and optional endorsements to tailor coverage for almost any residential or commercial course of construction project. A builders risk insurance policy is often required to comply with government regulations or as a condition to meet banking or other contractual arrangements.

A standard builders risk policy does not typically provide coverage for workplace accidents and injuries or liability coverage. Stand-alone premises liability insurance for slip-and-fall accidents may be secured in addition to course of construction coverage.

What does builders risk insurance cover?

Course of construction insurance is designed to protect job sites from loss and damage. While exact coverages and limitations vary between providers, comprehensive builders risk policies may offer coverage for the following (but not limited to):

  • Property damage
  • Theft
  • Vandalism
  • Fire or lightning
  • Arson
  • Collapse
  • Windstorm or hail
  • Materials in transit
  • Debris removal
  • Back up of sewers, drains or sumps

Depending on the coverage form, project type and total completed value, your client may purchase a number of other endorsements, including flood and earthquake in some states, to expand the already extensive builders risk insurance coverage, subject to underwriting guidelines.

Who needs builders risk insurance?

Almost every individual or entity with a financial interest in a completed course of construction project is eligible to purchase a builders risk insurance policy, including personal and commercial lines consumers.

Eligible clients for commercial or residential builders risk policies – all of which can purchase the policy in their name, include:

  1. Homeowners / property owners
  2. House flippers
  3. Builders
  4. General and sub-contractors
  5. Retail companies
  6. School districts

Policy features, benefits and terms remain the same, no matter who is identified as the insured. However, types of available builders risk policies vary by client type.

When should builders risk insurance be purchased? 

Demand for a builders risk policy is often time sensitive. Most purchases occur prior to or on the date of construction when the contract is finalized, which means you’ll need to act promptly when your client requests about builders risk insurance coverage. With benefits like online policy issuance, responsive service, direct access to a dedicated team of underwriters, and a program insured by a financially stable carrier, US Assure® is prepared to help you secure coverage quickly.

In some cases, your client might begin construction without securing builders risk coverage, you will need to provide the percentage of construction completed during the application process, in addition to the total completed value. Projects greater than 30% complete are eligible through our program but subject to additional underwriting review.

What does builders risk insurance cost?

The cost of a builders risk insurance policy generally depends on the cost of the project in combination with the following factors:

  • Property type
  • Location
  • Construction type
  • Optional coverage selected
  • Additional fees and taxes

A policy from the Builders Risk Plan insured by Zurich starts at $375 in most states.

What does builders risk insurance cover?

Residential and commercial builders risk insurance policies are typically available for three construction segments:

  1. New construction: includes any new building constructed from the ground up, whether residential (home, apartment / condominium, duplex) or commercial (office building, restaurant, retail store).
  2. Remodeling: including or excluding the existing structure; involves structural and functional changes to an existing space beyond an installation.
  3. Installation: more limited in scope compared to a complete remodel; involves installing a single fixture or feature, such as new cabinets or flooring in a residential property, or an awning or signage for a commercial property.

While limits as to risk value vary by company, the Builders Risk Plan insured by Zurich offers coverage for course of construction projects valued up to $75 million.

What types of builders risk insurance policies are available?

Builders risk insurance policies are typically available for residential or commercial new constructionremodeling (including or excluding the existing structure) and installation projects.

From there, builders risk insurance policies types vary between providers. Despite differences in terminology, most builders risk insurance is available in a few different ways. Those policy types typically include:

  1. Single policy for contractors or owners with new construction, remodeling or installation project.
  2. Reporting form policy for contractors with multiple residential and commercial new construction projects.
  3. Blanket deposit premium policy for contractors averaging as low as 25 or more residential or commercial new construction builds a year.
  4. Blanket installation policy for trade contractors with residential and commercial projects.

To determine the right builders risk policy for your construction client, you’ll need to assess their portfolio by asking questions such as:

  • What types of projects are your builders targeting?
  • How many starts is the builder expected to take on in the next 12 to 18 months?
  • Where is the construction being performed?

These are all factors you should consider during the policy selection process.

How do you choose a builders risk insurance provider?

Partnering with an expert that also offers financial stability and reliability is the best place to start.

Offering a provider with a proven track record of favorable claims history is also a critical factor when advising any client. Providers like US Assure® and Zurich, that practice sound and consistent underwriting and have expertise in construction remain consistent with respect to appetite and pricing, and are proven reliable partners.

Learn more insights about what builders risk insurance covers when you download our complimentary resource, From Groundbreaking to Remodeling: Builders Risk 101 Guide.

This is intended as a general description of certain types of insurance and services available to qualified customers. Any description of policy provisions is meant to give a broad overview of coverages and does not revise or amend a policy. Refer to the policy coverage form for a complete representation of the scope of coverage, terms, conditions, exclusions and more. The policy is the contract that specifically and fully describes your coverage. Some products may not be available in all states and may only be offered on a non admitted basis. Product availability is subject to change.

Builders Risk Insurance 101
Ensuring your clients have the proper coverage and policy type requires a fundamental understanding of the construction industry and associated risks that occur during construction. Review this guide to strengthen your understanding of builders risk insurance.

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