Builder's Risk Insurance Cost

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Builders face a variety of challenges and risks that businesses operating in other industries don’t typically have to worry about. As such, builder’s risk insurance is designed specifically to address these risks so that builders are protected during the construction process.

But what exactly does it cover? How much does it cost? Where can you find the right policy? Here’s everything you need to know about the cost of builder’s risk insurance and how to find the best policy.

What is Builder's Risk Insurance?

A builder's risk insurance policy is designed specifically to protect buildings and structures that are under construction, development, or renovation. Policies can cover construction materials, labor costs, temporary structures, construction signs, and even plants or trees.

Policies pay for damages up to the specified coverage limit. The coverage limit reflects the total cost of the completed building, including labor costs and materials, but not land value.

Terms may be between three and 12 months, and can usually be extended if the project isn’t completed on time.

What Does a Builder's Risk Insurance Policy Cover?

Builder's risk insurance coverage is rather extensive and generally covers damage to the insured structure caused by the following events and more:

  • Fire
  • Hail
  • Wind
  • Lightning
  • Explosion
  • Theft
  • Vandalism

It’s important for builders to carefully review their policy to understand what exclusions may apply. Common builder’s risk insurance policy exclusions include:

  • Employee theft
  • Water damage
  • Earthquakes
  • War
  • Government action
  • Weather damage to property left in the open

These policies may also protect builders in the case of bodily injury, damage to third-party property, personal injury, lost business income, and other challenges builders may face throughout the construction process.

How Much does Builder's Risk Insurance Cost?

The cost of builder's risk insurance can vary from project to project and is dependent on several factors, such as project type, location, construction type, and a variety of risk factors. The cost of builder's risk insurance starts at:

  • $39/month for general liability coverage
  • $49/month for general liability + property coverage
  • $49/month for business owners policy + workers compensation coverage

Depending on your specific needs, your monthly premium may be higher than those listed above.

Types of Insurance Builders May Need

To prevent lawsuits of injury, illness, improper construction, or other issues, builders should consider taking our one or more of the following policies in addition to builder’s risk insurance:

General Liability: General liability policies cover legal costs in the event that a third party attempts to hold you responsible for personal injury or property damage.

Commercial Property: Commercial property coverage pays to replace the building, materials, and equipment in the event that any are destroyed by vandalism, theft, or fire.

Inland Marine: Inland marine coverage will protect you in case any equipment is damaged or lost during transport. This includes equipment, tools, materials, passengers, and drivers during transportation to and from a building site.

Professional Liability: A professional liability policy will protect you in case your builder’s advice is ineffective and leads to financial and/or property damage.

Business Auto: Business auto policies pay to fix your or a third party’s vehicles when an auto accident occurs due to your negligence.

While builder’s risk insurance provides coverage for many of the challenges you may face during the construction process, these policies will fill in the gaps to ensure you are protected from major out-of-pocket expenses.

Tips for Buying

Finding the right builder’s risk insurance policy can be difficult due to the sheer number of policy providers on the market.
Keep the following tips in mind to help you find the policy that best suits your needs:

  • Compare quotes: As the cost of builder’s risk insurance can vary greatly from lender to lender, be sure to compare quotes to find the best rates available.
  • Know what coverage you need: Every project has different needs in terms of policy coverage. Knowing what you need before you begin shopping can help you avoid paying extra for unnecessary coverage. You should also know how long the project is expected to take so that you can choose the right term length.
  • Review exclusions: Review your policy’s exclusions to understand what is not covered and what additional policies you may need to take out.

FAQ

Do I need builder’s risk insurance?
Short answer: Yes.
Builders need insurance to protect themselves from risks that can result in a lawsuit. Builder's risk losing their business, assets, and reputation without the right insurance policy in place.

What risks do builders face?
Builders face a number of major risks including weather damage, vandalism, theft, damage to materials during transport, personal injury, ineffective advice from consultants, and more.
These risks can leave builders vulnerable to legal and financial repercussions if they don’t have insurance to protect them.

What is a wrap-up insurance policy?
A wrap-up policy is a type of insurance that protects contractors and subcontractors who are working on a construction project.
This type of insurance is intended for projects that are expected to cost more than $10 million.

Summary

While it can be tempting to cut costs whenever possible, builder’s risk insurance is a necessary expense for any building project and should never be overlooked. Builders face several risks that leave them open to severe repercussions if they are not covered by the right policy.

Fortunately, builder’s risk insurance can start from as low as $39/month, depending on your specific needs.