Understanding Builder’s Risk Insurance

To fully understand the importance of builder’s risk insurance, it is first important to understand what this type of insurance policy is. For the most part, it is a type of property insurance. Many times, it is referred to as Course of Construction. The purpose behind the policy is that it provides coverage for a piece of construction while it is in the construction phase. Those who purchase this type of insurance can choose what is covered. For example, some people choose to cover only the building itself, while others may opt for a policy that covers both the building and the materials.

A builder’s risk insurance policy usually has some type of limit. If damage occurs that exceeds this limit, it will be not be the responsibility of the insurance provider to cover the associated expenses. Because of this, it is of the utmost importance for a policyholder to purchase a plan that adequately covers the total value of a building as well as any materials being used.

Most builder’s risk policies can be written in any of the following terms:

  • Three months
  • Six months
  • 12 months
If a construction project happens not to be completed within the term of a policy, a one-time extension can usually be obtained.

Understanding What is Covered

Most builder’s risk policies provide coverage for a wide range of events that could result in damage, including:

  • Theft
  • Fire
  • Explosion
  • Vandalism
  • Wind
  • Hail
  • Lightning
The best way to determine what is and is not covered by a builder’s risk insurance policy is to read through is limitations and exclusions. Standard exclusions tend to include:

  • Voluntary parting
  • Water damage
  • Government action
  • Earthquake
  • Contract penalty
  • Mechanical breakdown
  • War
  • Employee theft


As said before, a one-time extension may be provided if a construction project is not finished by the time an builder’s risk insurance policy ends. Sometimes, there are others reasons in which an extension can be obtained. One such reason often includes when a part of the project is damaged while in transit to the construction site. Another reason that an extension may be granted is when the fire department is called upon to protect or save a property from a loss that is covered within the policy.
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