Builder’s Risk Insurance
Understanding the Gap between your Personal or Commercial Property Policy &
Builder’s Risk Insurance.
Whether you are considering a major home renovation, planning to remodel your office space,
or building something new from the ground up, if you haven’t notified your insurance company
before the work begins, your time and the money you’ve invested likely aren’t covered. You
could be voiding the coverage on your existing residential or commercial property policy as
Structures under construction pose an inherently greater risk to insurers than those that aren’t
because there is more opportunity for things to go wrong. This is true no matter the size and
scope of the work being done.
Accidental damage to exposed pipe or wiring can cause severe and often devastating fire or
water losses. Construction sites that are vacant or unoccupied are more attractive to thieves
and other criminals, and a labor shortage in the industry has companies desperate to fill new
positions as the industry continues to flourish with inexperienced or over-houred tradesman.
These are just a few examples of why insurers across the country have attached conditions to
the policies they offer that exclude coverage to any building under construction unless
permission is granted before work begins.
Beyond Advice: Permission granted doesn’t necessarily mean coverage granted. Your insurance
company may add an endorsement or special condition to your residential or commercial property policy
expressing consent for you to proceed with your renovation or construction project, but if you haven’t
discussed the coverage provided – and the exclusions that still apply – with your insurance provider, you
may find yourself inadequately covered should a loss occur.
“I’ve hired professional contractors. If something goes wrong, I’m protected by their
While that statement may be partially true (some of the time), it is important to remember that
the sole purpose of your contractor’s General Liability policy is to protect them. Not you.
The Commercial General Liability (CGL) policy is designed to respond in the event the policy
holder is sued for property damage or personal or bodily injury which is caused by the use of
their products, services, or the negligent actions of their employees. It provides the policy
holder with coverage for legal expenses, court-awarded damages and out-of-court settlements.
What does this mean for the property owner when a loss occurs?
A contractor’s liability insurance will only respond to loss or property damage if the contractor
is found liable or at-fault for the loss or damage that occurred, and often, when a claim arises,
liability is disputed by one or more of the parties involved.
When this happens, reaching a settlement can be both costly and time-consuming. For the
property owner who is ill-prepared and under-insured, this can mean project delays and for the
business owner, there is potential for lost revenues.
How does Builder’s Risk Insurance work to fill these gaps?
Also known as a Course of Construction policy (COC), Builder’s Risk Insurance is short-term,
project specific and tailored to meet the property owner’s coverage requirements in all areas of
the construction process.
From design to wrap-up, a Builder’s Risk policy offers protection against losses or damage
suffered at the construction site and to the building undergoing construction. It provides
coverage for both hard costs, such as labor, materials and equipment related to the project
insured, and soft costs such as professional or administrative fees, project management costs
and interest on money borrowed.
In the event liability is disputed, the Builder’s Risk policy will respond immediately, and claims
made against the policy should have little to no impact on the property owner’s claims rating
under their existing residential or commercial property policy.
Usually the responsibility of the property owner, Builder’s Risk Insurance is written with a
broader definition of who qualifies as a named insured, and is made available to any party with a financial interest in the project. While not an inclusive list, coverage may extend to the
general contractor, construction manager, sub-contractors, lender and building engineer.
Beyond Advice: Never assume the contractor you’ve hired has obtained Builder’s Risk Insurance for your
property on your behalf. If the contractor is required to obtain coverage as part of your written
agreement, make sure you receive proof of coverage prior to your project’s start date.
One final note for every property owner to consider – although placing coverage after
construction has started is not impossible, it can be more difficult. Often times, it’s also more
If you have construction planned, or are simply entertaining the idea of a new project, it’s both
wise and recommended to speak with your insurance broker today!