top of page
Search

Does My Construction Project Need A Builder's Risk Insurance Policy?

Writer's picture: Derek CarrollDerek Carroll

Construction projects, whether small renovations or large-scale developments, come with unique risks. One way to mitigate those risks is through a builder’s risk insurance policy. But who actually needs this type of insurance — the homeowner or the contractor? And when is it necessary? Let’s dive into these questions to better understand builder’s risk policies and their significance.

What is a Builder’s Risk Policy?

A builder’s risk policy is a specialized type of property insurance designed to cover buildings under construction. It protects against risks such as theft, vandalism, fire, weather damage, and other unforeseen events that could result in financial loss during the construction process. Coverage typically applies to materials, fixtures, and equipment on-site or in transit.


When is a Builder’s Risk Policy Necessary?

A builder’s risk policy is essential whenever construction or renovation is underway. This includes:


  1. New Construction: For custom homes, commercial properties, or any building erected from the ground up, a builder’s risk policy safeguards against construction-specific risks.

  2. Major Renovations: If renovations significantly alter the structure, involve expensive materials, or require extended timelines, a builder’s risk policy is advisable.

  3. Installations and Additions: Projects like installing solar panels, building home extensions, or adding new fixtures benefit from the protection of a builder’s risk policy.

  4. Project Financing: As mentioned earlier, many lenders mandate this coverage to ensure their financial backing is protected.

    Construction projects, whether new builds or remodels, benefit from a builder’s risk policy to protect against potential losses.
    Construction projects, whether new builds or remodels, benefit from a builder’s risk policy to protect against potential losses.

    Who Needs a Builder’s Risk Policy: Homeowner vs. Contractor


Homeowners A homeowner undertaking a construction project may need a builder’s risk policy, especially for custom builds, major renovations, or home remodels. Here’s why:

  1. Protection of Personal Investment: Homeowners often invest significant amounts into construction projects. A builder’s risk policy ensures that their financial stake is protected against damages or delays caused by covered risks.

  2. Control Over Coverage: By purchasing the policy themselves, homeowners can customize the coverage to include specific risks and materials relevant to their project.

  3. Loan Requirements: Many lenders require proof of builder’s risk insurance before funding construction projects to safeguard their investment.

  4. Coverage For What Homeowners Insurance Does Not Cover: While homeowners insurance is essential for protecting your property, it does not typically cover damages or risks associated with construction projects. Standard homeowners insurance doesn’t cover risks like theft of construction materials, weather damage to incomplete structures, or accidents during renovation.


Contractors Contractors may also need a builder’s risk policy, particularly if they’re responsible for the project’s success. Reasons include:

  1. Liability Protection: Contractors face potential liabilities for damages to the structure, materials, or equipment. A builder’s risk policy provides an added layer of protection.

  2. Project-Specific Coverage: Contractors often work on multiple projects simultaneously, and having a builder’s risk policy ensures comprehensive coverage for materials and tools across sites.

  3. Contractual Obligations: Many contracts stipulate that the contractor must secure a builder’s risk policy as part of their responsibilities.

  4. Coverage Beyond General Liability: If a contractor’s error causes damage, homeowners insurance will generally not provide coverage. This is where contractor’s liability or builder’s risk insurance comes into play.


Determining who should secure the builder’s risk policy often depends on the terms of the construction contract. In some cases, the homeowner’s investment and control over the project make them the logical policyholder. In other situations, the contractor’s responsibility for materials and site management makes them the better candidate.


Regardless of who takes out the policy, the most critical factor is ensuring that all parties involved are adequately protected. If you’re embarking on a construction project, consult with an insurance professional to understand your specific needs and ensure your investment is safeguarded from start to finish.


Work With a Local Independent Agent

Purchasing a builder’s risk policy can be complex, but working with an experienced independent insurance agent can make the process seamless. Independent Insurance Agents like Clark Carroll Insurance Agency can help you tailor a policy that meets your specific needs, whether you’re a homeowner or contractor. Call Clark Carroll Insurance Agency at 815-244-1570  or click here to get a quote



7 views0 comments

コメント


bottom of page