What Does Builder’s Risk Insurance Cover?

With the risks associated with working in the construction industry, delayed projects and unexpected circumstances could result in losses worth millions. However, with financial protection such as builder’s risk insurance, you can negate these risks.

But what does builder’s risk insurance cover exactly? What are some situations where a claim would be valid? Keep reading to learn exactly that as we walk you through the ins and outs as well as outline some scenarios in which it can protect you. 

Now, let’s begin!

Builders Risk Policy vs Commercial General Liability Policy 

Builder’s risk insurance is a specific type of commercial property insurance designed to protect properties—both residential and commercial—against losses while they are still under construction or renovation. It also provides financial coverage against damage to any machinery, tools and equipment, materials, and supplies used on the job. 

A common misconception that many contractors have is that builder’s risk insurance is similar (or the same, in some cases) to commercial general liability insurance (CGL). 

While a builder’s risk insurance policy covers risks and hazards to the building itself, it typically does not cover injuries or accidents at the job site. Meanwhile, a CGL policy protects against third-party risks that threaten your daily operations such as:

• Third-party injuries
• Third-party property damage
• Advertising or reputational harm
• Product liability

While the exact coverage and limitations depend on your specific needs, every contractor should have both builder’s risk insurance and CGL coverage. These two policies work hand-in-hand to ensure your business and future projects succeed.

Image source: Canva

Builder’s Risk Coverage: 4 Claims Examples

If you’re asking “What does builder’s risk insurance cover?” you likely want some examples of specific scenarios in which you could file a claim. In this section, we’re going to provide you with exactly that—four examples to be precise! 

1. Structural Damage from Weather

Problem: You were hired to build a commercial building in a well-known suburban area. A severe storm hit the region during the construction, causing significant damage to the partially built infrastructure and delaying the progress of the project. 

Outcome: While the exact cost covered would vary depending on your specific policy limits and inclusions, your builder’s risk insurance claim is valid and covers the cost of repairs, clean up, and replacement of any lost or damaged equipment.

2. Vandalism 

Problem: You accept a bid on a project where you’ll be restoring an abandoned house near a famous tourist spot so that it can be used as a vacation home for rent. While close to completing the restoration job, you notice that the home was broken into and severely vandalized to the point of causing significant damage to the property.  

Outcome: Your builder’s risk insurance policy can cover the costs of repairing the damage caused by vandalism as well as replacing stolen materials or equipment. The total cost covered as part of the claim amounts to $120,000.

3. Theft of Materials and/or Equipment 

Problem: You leave your tools and equipment overnight at a construction site, thinking that it would be safe since they are stored in a locked container. You come back the next day to find the container has been broken into and your tools have been stolen. Now, without them, you expect your project to be delayed. 

Outcome: Construction sites are often targeted by thieves because they know the equipment and materials found there can be expensive. Fortunately, your builder’s risk policy can cover the cost of replacement for the stolen property, ensuring your construction project can continue without further interruptions.  

Image source: Canva

4. Fire and Water Damage 

Problem: You are hired to restore an apartment complex that’s worth millions. However, continuous rain damages the interior of the building, leading to additional repairs and expenses, as well as delaying the project’s progress.

Outcome: Your builder’s risk policy can help cover the costs of water damage to the building, including restoration of the affected area and replacement of materials needed for the continuation of the project. 

What Is Not Covered Under Builder’s Risk Insurance 

In discussing how builder’s risk insurance differs from CGL, we outlined how it does not provide coverage for injuries and accidents. While quite encompassing, there are some other situations that a normal builder’s risk policy won’t cover: 

• Acts of war and/or terrorism
• Damage that can be attributed to faulty design
• Theft committed by your employees
• Mechanical breakdowns
• Corrosion and rust-related damage
• Normal wear and tear

Remember: builder’s risk insurance is designed to protect you from the unexpected, so issues that you could have avoided likely won’t be covered! 

Protect Your Construction Sites With KASE Insurance

So, what does builder’s risk insurance cover? As you’ve learned, it protects your sites from the dangers you can’t control such as fire damage, theft, and vandalism. Sometimes bad things happen even when you’re careful—that’s what this policy is for! 

If you need a builder’s risk policy, KASE Insurance is an award-winning insurance brokerage firm based in Ontario that’s ready to help. We have worked with clients across numerous industries. We create customized benefits packages that suit diverse needs, including personalizing builder’s risk insurance policies.

With that said, if you’re still unsure about what builder’s risk insurance covers, we’ll be happy to discuss it further. Contact us today or request a quick quote to get started!