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Factors Affecting the Cost of Coverage:

New Construction

The coverage needed for a new construction project may include coverage for site preparation, excavation, foundations, pipes, and temporary structures (such as scaffoldings).

Existing Structures

Many builders’ risk policies provide cash value coverage for the existing buildings; replacement cost coverage may increase your policy cost.

Building Materials

Materials such as fixtures, tools, and equipment may be covered under a builder’s risk insurance policy. Materials used in a project may directly affect your overall policy cost. For example, your policy cost would most likely increase if the contractor uses high-grade building materials and custom installations.

Off-site Property

Additional coverage for builder’s risk insurance/course of construction insurance can protect materials that are still in transit, meaning they have not yet arrived at the project site, or materials that are stored off-site. This additional coverage is vital if an accident occurs off-site; for example, a fire breaks out in your storage facility, or the truck transporting your materials crashes. This additional coverage will also have a factor in determining your overall policy cost.

What Does Builder’s Risk Insurance Cover?

A building under construction is subject to many risks; these include (but are not limited to) fire, damage caused by high winds, theft, and vandalism. Builders’ risk insurance coverage protects for a wide variety of these events. Standard coverage and exclusions are:

Common Builder’s Risk Exclusions

• Design error or faulty workmanship.
• Employee dishonesty or illegal acts.
• Accidents and/or injuries in the workplace.
• Earthquakes.
• Floods.

Exclusion Example:

The general contractor must note that subcontractors are required to have their own insurance and that there is no coverage for tools and equipment.

Builder’s Risk for New Construction Vs Renovation

There are a lot of rating and coverage factors to consider when looking to insure a renovation versus a new construction project.

New Construction

For new constructions, the builders’ risk policy covers the building from the groundbreaking period until completion.

Renovation

On a renovation project, the policy will often only cover the restoration period. A builder’s risk policy can be designed to cover the cost of the renovations only or the renovation exposure and the existing building together. If a builder’s risk policy is not specifically tailored, there may be a problem in coverage for either the building or the renovation portion. That is why it is crucial to ensure that the correct coverage forms are included.

Common Builder’s Risk Policy Extensions

Debris Removal

Most Builders’ Risk coverage offers repairs for the building in the event of a storm. But in construction, exposed structures mean big, moving parts. If your site gets strewn with debris, you’re expected to haul it out of your own pocket. Industrial dumpster rental alone can cost $900. An extension will pay for the whole disposal.

Green Building

Similarly, if you clear debris, perhaps you’d rather not dump it in a landfill. Green construction is a gigantic, growing global industry expected to hit $377 billion in 2022. The US has the largest market. More and more clients want to work with sustainable contractors.
An extension for debris recycling, renewable energy repairs, and air purification from third-party damages can help establish your reputation in this vital sector. It’s a coverage extension increasingly requested for Builder’s Risk policies.

Pollutant Cleanup

Perils like fire, wind, rain, and explosions can seriously devastate a construction site. Containers with paint, tar, or other potentially toxic materials could get damaged and seep into the soil or groundwater. Or, a fire could create hazardous fumes.

Pollution cleanup costs are immense, and contractors are more exposed than most. Standard Builder’s Risk policies won’t cover it. You can, however, add an extension that will pay for this. It’s especially useful if you work with lots of dangerous materials.

Delay of Completion

You can’t control everything in construction. The risks are high, and there are so many unexpected variables. Supply chain issues, weather events, and equipment loss can all lead you to overshoot your deadlines. If the completed building would have brought 25% in revenue for your company’s next quarter, that’s 25% lost.

A common extension for Builder’s Risk policies will protect you against this. ‘Delay of Completion’ coverage means your insurance provider estimates what you’re going without and covers it to see you through.

Water Build-Up Damage

Florida has 583,600 construction workers, the third most in the whole USA. It also has 1.5 million people living on a FEMA floodplain and the highest summer rainfall. All this to say: water poses a severe risk to construction sites. And not just in Florida. 2019’s national rainfall was 30% above average and has risen 90% since 1950. What if you’re renovating a building and water builds up in clogged pipes on the 30th floor? If it leaks out over a weekend, seeping down to lower floors, imagine the damage that could do to your project. It could easily be millions of dollars.

The water build-up extension is small. But it is commonly added to Builder’s Risk policies for a good reason: water damage is very expensive.

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