Builders risk insurance covers risks that some of your other contractor insurance policies may not cover. Builders risk protects your tools and equipment on the job site and helps cover damage to completed portions of a project while work is still underway.
Builders risk is a comprehensive insurance policy that covers all of the parties involved in a project, including:
- general contractor
- property owner/ developer
- subcontractors
- banks funding construction
If an unexpected accident happens during the course of construction, each of these parties could be facing a financial loss. Insuring everyone under the same policy covers everyone’s interests… and helps ensure there are minimal disputes or finger-pointing along the way.
With all of these parties being protected under builders risk insurance, who is responsible for buying the policy?
Who Pays for a Builders Risk Policy?
Since there is only one builders risk policy covering a project, only one of the project participants is responsible for putting the policy in place.
Typically, a builders risk policy is purchased by either:
- General contractor
- Developer or owner
Both of these parties are making the largest investment in the project, have the most to lose, and, therefore, stand to benefit the most from builders risk protections.
While working out the details of the given construction project, the general contractor and owner of the project will agree on who is responsible for purchasing the policy and will then make sure that all of the parties with a vested interest in the project are listed as insured on the coverage.
Who Should Be Covered Under a Builders Risk Policy
Anyone with an “insurable interest”, aka something to lose, should be listed as an insured party on the policy.
It’s important to be sure that all parties who are working on, and investing in, a project are covered for possible damages during the course of construction. Be sure they are all included on the policy.
General Contractor
One of the two parties who responsible for purchasing the builders risk policy and paying for deductibles that arise, the general contractor is the number one name that needs to be listed as insured under the policy.
As both overseer of work progress and owner of the business completing the work, the general contractor is taking on the largest risk of all parties involved in the project.
Developer or Property Owner
Much like the general contractor, the property owner typically has a larger share of interest in protecting the property.
Lacking proper insurance coverages on the part of the contractor could put the owner at risk for financial loss should they have to pay out for damages to completed portions of an ongoing project.
In situations where the general contractor doesn’t purchase a builders risk policy, the owner or developer is responsible for doing so.
Subcontractors
Any subcontractors that are working on a given project need to be named in the builders risk policy.
It is more common than not for subcontractors – such as roofers or plumbers – to be called on to employ their specific skill set for a portion of a build.
If damage from an accident were to effect an area a sub worked on, a builders risk policy can cover their financial losses along with those of the general contractor and owner.
The Bank
Much like the owner/ developer, a bank that is funding your project is at risk for financial loss should an accident occur during the course of construction.
Listing the financial institution that is loaning money for the build as the mortgagee will offer them protection from financial losses in the event that an unexpected should occur.
Who Shouldn’t Be Covered by a Builders Risk Policy
While all parties with a financial interest in the construction project should be listed on a builders insurance policy, certain parties involved in a build aren’t at risk of financial losses, usually because they have been paid for their work on a project up front.
Examples of those involved in a construction project that should not be named as insured under a builders risk policy include material suppliers and architects.
What Does Builders Risk Insurance Cover?
A builders risk policy assures that you won’t have to foot the bill for financial losses in the event of:
Damage to a Structure in Progress
Builders risk can help with teardown, clean up, and restart of work should fire or vandalism destroys work that has already completed on the insured project.
Onsite Theft
It is not uncommon for valuable tools, expensive copper wiring or other materials, equipment, or supplies to be stolen from a project site. When assets go missing, builders risk can help cover the losses.
Damage from Weather Events
Builders risk helps cover losses from damages to structure, materials, and supplies caused by hailstorms, windstorms, and rainstorms during a build. This policy helps with costs for cleanup and repair of a non-severe weather event that may damage the insured project.
Builders risk insurance is an essential coverage for projects that are in progress. It’s typically the responsibility of the general contractor or the owner/ developer to purchase a policy that will cover losses for all who have a vested interest in the project during the course of construction. If you’re a subcontractor about to start work on your next big project, be sure you’re listed as a named insured on the project’s policy. You’ll be covered - just in case.
