What does builder’s insurance cover? – Forbes Advisor


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Construction site insurance covers the property of buildings and works under construction. If you’re a builder or commercial building owner, you could face significant monetary loss if something goes wrong with the construction of a building and you don’t have builder’s risk insurance.

Here’s what you need to know about builders insurance, what it covers and what it doesn’t.

What is builder’s insurance?

Builders risk covers property and building materials during a project. It is also called “construction insurance course”. Builder risk policies are available for new construction projects, renovations and installation work. Projects are classified as either commercial or residential risk.

People who might need builders insurance include building owners, contractors, sub-contractors, architects and engineers.

What does builder’s insurance cover?

Builders risk protects builders against several types of problems, including:

  • Fire
  • Flash
  • Hail
  • Blast
  • Flight
  • Vandalism
  • Hurricanes and other “acts of God”

Builders risk insurance can cover:

  • Buildings and structures under construction, including temporary storage buildings, fencing and scaffolding
  • Equipment, such as repairing damaged equipment, as long as the equipment is covered by the policy
  • Materials and supplies used
  • Building signs, trees and plants
  • Valuable documents such as plans and electronic data
  • Work
  • Costs of ordinances and laws, or increased repair or reconstruction costs due to building codes and laws at the time of the loss

Builders risk policies may also cover the following “indirect” costs resulting from construction delays:

  • Additional interest on loans
  • Lost sales revenue
  • Property taxes
  • Rental income

What does builder’s insurance not cover?

Not everything is covered by a builder’s insurance policy. For example, earthquakes and floods are generally not covered, but you can purchase additional insurance for these issues. Here is a brief overview of other common exclusions:

  • Acts of terrorism and war
  • Damage due to faulty design
  • Employee theft
  • Mechanical failures
  • Rust and Corrosion
  • Normal wear

Be sure to check a policy’s exclusions before purchasing it. You want to be aware of the costs you will pay if the worst happens.

The cost of builder’s insurance

The median cost of builder’s risk insurance is typically $95 per month, according to Insureon. It’s a good idea to choose coverage limits that are equal to the estimated construction costs.

Exact coverage and policy limits vary between insurers. So be sure to shop around for coverage and price.

Who should take out construction insurance?

The types of people and businesses that can benefit from builders insurance include:

  • Architects
  • Builders
  • Development and investment companies
  • General contractors
  • Lenders
  • Subcontractors

How to Find the Right Builder’s Risk Insurance Policy

Buying builders insurance is similar to buying any other insurance: you need to decide what coverage you need and compare rates from several insurance companies. There are also a few differences to understand.

Here’s how to find the best builder’s liability insurance policy for your situation.

Determine the coverage you need

Think about the project and your risks. This should include transport, materials, construction site and storage.

Depending on your risk, you can decide on coverage.

Decide when you need insurance to start

You usually need coverage once the contracts are signed. Your policy will contain information on when coverage begins.

Estimate the length of coverage you need

Builders risk generally ends when the project is finished. The policy should include specific terms for termination of coverage. This may be when the policy expires, when the building is occupied, or when the building is in use for its intended purpose.

Understand coverage

A builder’s risk policy excludes costs associated with repairs or correction of defective work associated with a subcontractor. But a policy with a consequent provision for loss can cover damage and faulty work.

Exclusion provisions differ by policy, so make sure you understand the policy to avoid unpleasant surprises.

Construction site risk insurance versus general liability insurance for contractors

Contractors general liability insurance does not cover a contractor’s property. You will need a builder’s insurance policy.

A general liability insurance policy provides coverage if you are responsible for causing injury or property damage to someone else. It also pays associated legal fees.

As for damages, general liability insurance for contractors protects against fires and explosions that cause damage to others.

A general liability insurance policy for contractors will generally cover:

  • A person is injured on your property
  • Damaged business premises
  • You or an employee causing injury or property damage
  • You are being sued for false advertising, defamation or slander

For those in the construction industry, getting both builder’s and liability insurance is a smart move.

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