A Contractors Builders Risk and Course Of Construction Insurance policy, commonly known as “Builder’s Risk”, is designed to provide coverage for buildings/structures and vessels (also ‘Mobile Structures/Vessels’, such as in Maritime), for the value of the construction cost/value of the improvements being performed to structures/vessels while under construction. Builders Risk coverage responds to the value of the construction/improvements and materials/components while waiting to be installed, while in-transit, while at temporary secured locations and installed components or improvements being constructed until the project is either accepted by owner, put to its intended use or ready for occupancy/deemed for completion.
The Builders Risk policy may be written to cover a project structure/vessel for new construction or for rehabilitation/improvements to projects/structures/vessels. It can also be used to cover a specific project such as an addition to a structure, a remodel or enhancement to a project or a maritime vessel improvement such as bulkhead repair, salvage or restructure.
A Course of Construction, (Builder's Risk) policy is a form of Inland Marine insurance. The basic perils such as fire, wind storm, lightning, hail, theft and vandalism are common. Limited coverage may be provided for structural collapse during construction.
Earth movement, employee theft, “mysterious disappearance” (loss without any proof), water damage, weather damage to property in the open, war, government action, contract penalty, voluntary parting and mechanical breakdown, aircraft, watercraft or automobiles.
Builders’ Risk insurance does not include coverage for Bodily Injury or Property Damage of others. Ask your Broker about how your General Liability insurance could protect you during construction.
Debris removal, mold, terrorism, and damage by insects or vermin, damage resulting from faulty design, planning, workmanship and materials, plants, trees or shrubs.
Ask your broker about an All Risk policy. All Risk policies typically don’t exclude coverage for; fire, theft, vandalism, explosion, water damage, testing, mechanical or electrical breakdown and collapse.
Soft Costs are those expenses for the building process that are other than materials. Including reimbursement for losses caused by a delay in completion on opening of the project, things like: contractors profit, real estate taxes, interest, consulting fees, legal, accounting and advertising and/or marketing, equipment rental, overhead, re-permit cost, insurance, refinance charges and architectural & engineering expenses.
Claims are settled on an Actual Cash Value basis for Builder's Risk losses.
The Named Insured of a Builder's Risk policy is usually the Contractor or Developer of the property. However, it could be that the building owner or homeowner is the Named Insured, if they are responsible for insuring the property while under construction. Just as you’d expect with a Property Insurance policy, a mortgagee or lien holder may be added as an additional insured. For newly aquired property that will have an immediate remodel/rehab by a contractor, existing structure coverage may be requested.
Always ask your Broker about what’s covered on your specific policy, as this article is intended to give you a basic overview of what a Builder’s Risk, “Course of Construction” policy is about.
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