When Is Builder’s Risk Construction Insurance Required?

Residential and commercial construction contractors need to obtain a construction insurance policy—builder’s risk insurance—as a key component of running their business. Coverage must be obtained prior to beginning the job and is needed for every building job, regardless of the estimated cost of the project.

Builder’s risk coverage is necessary in order to comply with local and state regulations and is typically a condition of the contract. In some cases the property owner may purchase construction insurance, but the responsibility typically lies primarily with the builder.

However, in a situation where a homeowner is hiring a contractor to renovate or add to an existing structure, the homeowner’s property insurance may cover the construction work.

What does builder’s risk insurance cover?

Polices are structured to fit the needs of a particular job or business. Coverages may include:

• Property damage to construction materials, equipment, scaffolding or similar temporary structures, fencing, landscaping and other types of tangible property used on the job.
• Theft coverage can be built into a policy, but most times the builder is required to have a gated property to qualify.
• Coverages for labor costs, income and expenses are optional coverages to be discussed with your insurance agent.
• Weather perils like hurricanes, lightning, fires, severe snow or hail storms, loss of power or man-made perils like broken water mains and felled trees may be covered.

Regardless of which options interest you, it’s best to discuss the details of your project with your independent agent to ensure you buy the right coverage.

What’s not covered by builder’s risk insurance?

• Accidents and injuries on the job are not covered by builder’s risk insurance. Workers compensation insurance is a separate type of coverage that requires its own policy.
• Certain natural disasters like earthquakes and floods are typically excluded and require separate policies.

Insurance coverage lasts for the length of the building project—up to a year and is extendable. The coverage usually ceases when the building has been completed. In some locations, a signed occupancy permit signals the end of the building phase.

Your agent is prepared to help you understand the details of builder’s risk construction insurance and will guide you through making the best decisions for your business.

Protect your project-in-the-works. Call ACF Insurance Services at (919) 661-1100 for more information on Raleigh construction insurance.