When researching construction insurance, it's essential to remember that choosing between wrap-up insurance vs builder’s risk can significantly impact the success of your next project. While both offer vital protections, they cover different aspects of your build.
In this blog post, we’ll explore how these wrap-up liability and builder’s risk insurance are different, when to use them, and how to make the most informed decisions to cover your project adequately.
What Is Builder’s Risk Insurance?
Builder’s risk insurance, also known as course of construction insurance, is designed to protect a construction project during its duration. It covers property damage to the building under construction, on-site materials, and sometimes even temporary structures.
Builder’s Risk Insurance Key Features:
- Protects against fire, theft, vandalism, and natural disasters
- Typically purchased by the property owner, general contractor or developer
- Only active during the build, not before or after
What Is Wrap-Up Insurance?
Wrap-up insurance, also known as wrap-up liability insurance, is a comprehensive insurance product that provides uniform coverage for all parties involved in a specific construction project, including the project owner, contractors, and subcontractors.
There are two primary types of wrap-up insurance: Owner-Controlled Insurance Programs (OCIP) and Contractor-Controlled Insurance Programs (CCIP). Consulting with an advisor can help you determine which option best suits your needs and project.
Wrap-Up Liability Insurance vs Builders Risk: Key Differences
Let’s break down the difference between builder’s risk and wrap-up coverage:
| Feature | Builders Risk Insurance | Wrap Up Insurance |
|---|---|---|
| Main Focus | Property damage during construction | Liability insurance for all involved parties |
| Policyholders | Owner, developer, or general contractor | Either the project owner or the general contractor |
| Duration | Construction period only | May extend to completed operations |
| Typical Coverage | Fire, theft, and weather | Third-party liability, bodily injury, and pollution liability coverage |
| Best For | Renovation or new build projects | Large-scale builds with multiple contractors working |
Source: Canva
When to Use Builder’s Risk Insurance
You should opt for builder’s risk when:
- You’re working on a renovation project
- The project is relatively small or does not involve multiple subcontractors
- You need coverage specifically for property damage
It is also useful when you’re only concerned about protecting materials, scaffolding, and structures (as opposed to people or liability).
When to Use Wrap-Up Insurance
You may wish to choose wrap-up insurance when you:
- Have numerous contractors and trades involved
- Want a comprehensive protection that includes liability coverage
- Are overseeing large commercial or infrastructure projects
- Want to avoid coverage gaps between different insurance types
These wrap-up policies offer risk coverage for everything from workplace injuries to pollution claims, making them more ideal for complex builds.
Builder’s Risk vs Wrap Up Insurance: Coverage Considerations
The differences between builder’s risk and wrap-up also show in their coverage. Here’s a breakdown of what each option covers:
| Builder’s Risk Coverage | Wrap-up Insurance Coverage |
|---|---|
|
|
Course of Construction vs Builder’s Risk: Are They The Same?
Yes, the course of construction insurance is often used interchangeably with builder’s risk insurance. Both refer to insurance coverage that protects a structure during the construction period!
However, if you closely analyze the course of construction vs builder’s risk insurance, you’ll see that they vary slightly, depending on the provider or location. Builder’s risk is typically the formal policy name, while course of construction is a broader term that varies regionally. It’s best to speak with an insurance broker to confirm the appropriate coverage for your project.
Who Typically Purchases These Insurance Options?
Builder’s risk insurance is often purchased by the property owner, developer, or general contractor to cover the project. In contrast, wrap-up insurance policies are typically controlled by the party with the most liability, either the project owner or the lead contractor, to cover all bases, property and contractor-wise.
Both options aim to cover risks during the build, but offer different forms of protection for specific concerns.
How to Avoid Coverage Gaps
To stay adequately covered, you need to understand how different policies interact with each other. One of the most common issues arises when project managers assume a builder’s risk policy will cover liabilities—it won’t.
Whether you get wrap-up insurance, builder’s risk policy, or both, here’s how to avoid coverage gaps:
- Assess All Potential Liabilities: Don’t just cover the obvious. Evaluate risks like third-party injuries, material theft, weather damage, and pollution liability. A full risk assessment ensures no blind spots in your policy.
- Balance Property and Liability Coverage: Builder’s risk covers physical property, while wrap-up covers legal and injury claims. Relying on just one may leave you exposed. Most complex builds benefit from having both.
- Work With a Broker Like KASE: A specialized broker like KASE can help you identify gaps, negotiate better terms, and develop a plan that meets regulatory and project-specific needs without overpaying.
- Standardize Coverage Across the Site: With multiple parties involved, inconsistencies can lead to major issues. Wrap up insurance offers uniform coverage, keeping everyone—contractors, subs, and owners—on the same page and fully protected!
Why Proper Insurance Coverage Matters in the Construction Industry
In the construction industry, a single mistake can result in substantial losses. Without proper insurance coverage, you could be paying out-of-pocket for legal claims, theft or damaged materials.
For example:
- A dropped tool causing a serious injury = wrap-up insurance may cover it, paying for medical expenses, legal fees, or aid so you can continue business operations.
- A windstorm knocks down some framing = builder’s risk policy shoulders it, paying for damages.
Choosing the right insurance policy helps ensure that your construction work continues uninterrupted, even in the event of the unexpected.
Source: Canva
Making an Informed Decision: Builder’s Risk or Wrap-Up?
To make the best choice between wrap-up liability insurance vs builder’s risk, consider the following:
- Project size and complexity
- Number of trades and subcontractors
- Local regulations or lender requirements
- Value of materials on-site
- Who is most liable if issues arise
For large-scale or public projects, wrap-up liability insurance typically offers more comprehensive protection. For smaller jobs focused on structure or materials, builder’s risk insurance may be sufficient.
How KASE Insurance Can Help
Whether you’re overseeing a residential construction site or a large-scale commercial build, understanding the nuances of wrap-up insurance vs builder’s risk is crucial! Both offer important protections, but serve different purposes in the broader ecosystem of construction insurance.
To ensure your specific construction project is shielded from risk, speak with a trusted insurance broker on our team at KASE. We can help you select the right insurance policy and avoid any coverage gaps!
When it comes to builder’s risk vs wrap-up insurance, the smartest strategy is to get the proper protection from day one. Get in touch with us today to get started.