Builders risk insurance is a type of commercial insurance that protects a building or renovation project while it is being done.

These policies are sold by insurance agencies that offer various types of commercial policies to protect the project owner and other involved parties against financial losses of fixtures, supplies, labor costs, and other expenses during the actual construction phase of the project.

It is critical insurance that provides protections that are not offered by standard building, homeowners, or commercial policies.

These details provide helpful information on why and how owners and contractors should purchase this policy from a builders risk insurance company to protect the interests of everyone involved in the project.

Who Buys Builders Risk Insurance?

A builders risk insurance policy might be taken out by different parties with interest in a project depending on how the building or renovation contract is written and which party is taking responsibility for the completion of the project.

In many cases, insurance agencies sell these policies to the contractor but in other cases, it is the project owner who buys it.

Generally, the policy is sold to whichever party has the insurable interest in the project.

Though contractors are usually the ones that buy these policies in their names, project owners wishing to control the insurance interest of the project if there are concerns about completion times might purchase the policy on their own.

When Should Builders Risk Insurance Be Purchased?

The usual and best time to purchase a builders risk policy from an insurance company is prior to the actual start of the project but after the contract is finalized.

Since this is usually a small window of time, builders risk insurance should be sought out immediately upon contract finalization so the project can be valued and the policy active once construction begins.

Should the project be started before a policy is purchased, it is necessary to provide additional details pertaining to the percentage of the project that is already completed.

Since not all insurance agencies will insure a project that is already in progress, it is best to secure this coverage beforehand.

How Are Projects Valued For Builders Risk Insurance Policies?

Builders risk insurance companies write these insurance policies according to the project’s CTV or completed total value.

The total estimated value of the completed project takes into consideration all costs associated with its completion including labor, materials, overhead costs, and any estimated profit.

Those costs may include building materials, architect and subcontractor fees, site lighting and security, zoning modifications, payroll, utilities, administrative costs, and much more.

As these policies protect according to the estimated total value at completion, insurance agencies recommend reassessing project value periodically throughout the project and the policy adjusted as necessary to provide the right protection.

Builders Risk Insurance Protects Invested Interests

Whether a loss is caused by theft, vandalism, natural disaster, or some other peril, builders risk insurance policies protect contractors, owners, and other parties that have a financial investment in a building project.

Before breaking ground on any construction or renovation project, contractors should discuss this policy with project owners and determine which party will secure this essential protection.

A builders risk insurance company experienced with these policies can work with invested parties to properly value the project, then issue a policy that provides the coverage it needs.