Builders Risk Coverage Form in Insurance

What is Builders Risk Coverage Form?

Frequently referred to as construction insurance or builder’s risk policy, a builder’s risk coverage form is an insurance policy that provides cover to residential and commercial properties or structures while they are being remodeled, renovated, or if they are under construction.

This coverage is essential as it helps to secure construction projects. Having a policy that is structured correctly can be a crucial backup method, but it’s a complex and sometimes misunderstood policy.

The policy will usually be found on a completed or reporting value-form, and this is because there is no tangible form or contract to fill out.

What’s Covered Under Builders Risk Policies

The builder’s risk coverage helps to protect the building’s structure itself, equipment, machinery, supplies, and materials against hazards. The insurance will protect your construction, remodeling, or renovation projects from damage resulting from fire, hail, lightning, explosions, theft, and vandalism.

Remember: It’s unlikely that this type of cover will protect any accidents or injuries that occur on the job site, as well as the common hazards most policies will not insure against, like war or nuclear hazards.

The building components that are typically covered are:

•      Fixtures
•      Foundations
•      Machinery
•      Equipment- to service the building
•      Materials and Supplies
•      Removal of debris

Most policies do not extend to cover satellites or antennas, land, landscaping, and scaffolding, but check your agreement as your provider may offer protection.

Don’t Forget: Most policies allow you to add endorsements to your coverage to protect any excluded items- but this will increase your premium. Want to know how insurance companies record profits? See Earned Premiums.

Although builder risks insurance typically helps cover your construction projects, it’s also possible for soft costs to be covered despite not being directly linked to the construction. If the damages caused the delay, it could help with the following:

•      Rental Income
•      Lost Sales
•      Extra interest added to loans
•      Real estate taxes

Who Should Purchase a Builder Risk Coverage Form?

An individual, group of people or company with a financial interest or stake in the construction project should attempt to obtain a builder’s risk insurance. Typically, the people you a builder may seek to include on their policy as insureds are the property owners, lenders, architects, general contractors, and subcontractors.

Keep in Mind: Usually, this policy type necessitates that a builder has a set minimum amount of years’ experience.

How Does it Work?

There are some key specifics that an individual must follow before considering purchasing a policy.

The coverage limit allowed is the total value of the completed project, and when a person speaks to an insurance provider, the project must be less than 30% complete. It must list a level of completion once the coverage automatically ends.

Other pointers can cause an early end to your cover:

•      If your project is idle for 60 days or more
•      The project has been abandoned
•      The owner possesses the property
•      If 90 days or more have gone by since the construction project is completed
•      After a set number of days of occupancy

Extra Information: Providers may permit a policy to cover any delays to the construction work; delays must be due to facing an event of a covered casualty.

Summary: Builders Risk Coverage Form

A builder’s risk policy or a builder’s risk coverage form is an insurance policy that provides cover to residential and commercial properties or structures while being remodeled, renovated, or under construction.

The policy is usually suitable for a builder who has a set minimum amount of years experience, and it’s recommended that contractors, subcontractors, and lenders, amongst others, are added to the policy as the insureds.

It’s vital that you only apply for such a policy. If your project is less than 30% completed, others you cannot receive cover.

Some providers will cover you for any soft costs that cause delay to completion, even if they are directly linked to the construction, if the damages caused a delay, creating financial issues.

For other related insurance, terms see our glossary. For more about builder's risk, read our Ultimate Guide to Builder's Risk Insurance. Ready to get started? Get a Builder's Risk Insurance Quote here.