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Builders Risk Insurance

If You Are Insuring A Home Under Construction Or Being Built Buy Your Contractor Or Builder, You Need Builders Risk Insurance

Coverage for a house or commercial building under construction by a home builder is knows as builders risk insurance or building under construction insurance. It can also be used for existing structures during repair or remodel. For example, adding another story to a ranch home. What is surprising to many people about this coverage is it is written on what is called a Completed Value Basis, which is the expected value of the home, or whatever is under repair, when the work is completed. Even if the loss occurs on the first day of construction, the payment would be the expected final value.

One of the most important elements of this type of insurance coverage is the clause which states exactly when the coverage ends. This is where there can be differences among various insurance policies and insurers. For example, the policy may end on the date the building under construction is sold, or even 30 days after a new owner takes possession of the property so there is proper overlap.

Typically, this type of insurance does not exist by itself. The home builder or contractor would purchase this coverage form as part of a master Commercial Package Policy that can also provide coverage for the business building and the business property, like the tools and trucks at the construction site.

Of course, a major party to all of this is the mortgagee or lender. Home builders rarely fund the cost of the construction themselves, and any lender betting on the contractor will have certain standards that the insurance for the building under construction will need to meet before the money will be lent. Large contractors in the business of construction have good relationships with both lenders and insurance companies. In the case of the insurance company relationships, certain "standard" projects can be automatically covered without the need for them to be "scheduled" with the insurance company. It would be an administrative hassle for a home builder to have to secure every single project separately before construction can begin.

Just like with vacant lot insurance, liability is a main coverage component as well. A job site can never be totally closed off after the workers go home.

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