Builder's Risk Insurance Can Benefit Your B.C. Business

July 22, 2024

Builder’s risk insurance is a type of liability insurance that covers buildings under construction from the beginning to the end of the project. It’s also called course of construction insurance.

This type of insurance covers the building, construction materials on-site, and liability in the event of physical loss or damage due to an insured event, such as fire, theft, or vandalism.

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Here’s a detailed look at builder’s risk insurance:

Key risks covered by builder’s risk insurance to help protect your B.C. business:

1. Fire: Protects against damage caused by fire during the construction process.
2. Theft: Covers the loss of materials, tools, and equipment stolen from the construction site.
3. Vandalism: Protects against intentional damage to the construction project.
4. Natural disasters: Covers damage from certain natural events like windstorms, hail, and lightning. However, earthquakes and floods may require separate coverage.
5. Accidental damage: Protects against unintentional damage caused by human error or accidents on the construction site.
6. Materials and equipment: Covers materials and equipment stored on-site, in transit, or at temporary storage locations.
7. Soft costs: Covers indirect costs such as architectural fees, legal expenses, and interest on construction loans that may be incurred due to a delay caused by a covered peril.

Exclusions include:

1. Employee theft: Typically, theft by employees is not covered.
2. Normal wear and tear: Damage due to normal aging and usage of materials and equipment is excluded.
3. Defective workmanship: Defects or poor workmanship are generally not covered, although resulting damage might be.
4. Governmental action: Losses due to actions by governmental authorities are usually not covered.
5. Flood and earthquake: These natural disasters are often excluded and require separate policies.

Importance of builder’s risk insurance for your British Columbia business

• Financial protection: Provides crucial financial protection against unforeseen events that can cause significant financial loss during the construction phase.
• Lender requirement: Often required by lenders as a condition for financing construction projects.
• Peace of mind: Offers peace of mind to builders, contractors, and property owners by mitigating the financial risks associated with construction.

Considerations when you’re buying builder’s risk insurance

1. Policy duration: The policy should cover the entire construction period, from the start of construction to the project's completion or occupancy.
2. Coverage limits: Ensure the coverage limits are adequate to cover the total value of the completed project, including materials and labor.
3. Customization: Customize the policy to include specific coverages relevant to the particular project, such as coverage for scaffolding, temporary structures, or green building materials.
4. Deductibles: Choose deductibles that balance affordability with adequate protection.
5. Claims process: Understand the claims process, including how to document and report losses.

How it’s different from wrap-up insurance

Both wrap-up insurance and builder's risk insurance are crucial for risk management in construction projects.

Wrap-up liability insurance is a type of insurance that is designed to protect the parties involved with a construction project from liability for bodily injury or property damage to third parties during construction.

Wrap-up insurance also allows the policyholder to set a coverage limit based specifically on the size of the project.

Who needs builder’s risk insurance?

Builder’s risk insurance is essential for anyone involved in construction projects, providing comprehensive coverage against a variety of risks that can cause delays, financial loss, and damage.

By carefully selecting a policy that meets the specific needs of the project and understanding the covered risks and exclusions, builders, contractors, and property owners can protect their investments and ensure the successful completion of their construction projects.