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What Does Builder's Risk Insurance Cover?

Updated: Feb 25


Builder's risk insurance is a special type of property insurance which covers against damage to buildings while they are undergoing construction. It will pay for direct physical loss or damage to the covered property from a covered cause of loss.


Covered Property


Covered property means the property which has been installed or is to be installed in any commercial structure or any one to four family dwelling, private garage or other structure that will be used to service the commercial structure or one to four family dwelling at the location. This includes:


a. Your property;

b. Property of others for which you are legally responsible;

c. Paving, curbing, fences and outdoor fixtures;

d. Trees, shrubs, plants, grass, lawns and landscaping materials installed by you or on your behalf;

e. Completed single family dwelling which is being used as a model home when reported to us as such on monthly reports with an amount shown; and

f. Foundations of buildings and foundations of structures in the course of construction.


Covered Property does not include:


a. Existing buildings or structures to which an addition, alteration, improvement, or repair is being made, unless specifically endorsed;

b. Plans, blueprints, designs or specifications, except as provided in paragraph A.4. Additional Coverage of this Coverage Form;

c. Land and water;

d. Existing inventory, unless specifically endorsed;

e. Contractors’ tools, equipment, machinery and property of a similar nature not designated to be a permanent part of the location which you have reported to us; and

f. Outdoor trees, shrubs, plants, grass, lawns and landscaping materials that existed prior to the policy's effective date at a location which you have reported to us.


Limit of Insurance


The limit of insurance is the total estimated completed value that was on the signed insurance application for that one building or structure. It usually is the construction cost on the general contractor’s property for new construction. In cases of renovation, there an option to insured just the renovation cost or the sum of the value of the existing building and the renovation cost.


Additional Coverages

This Additional Coverage does not increase the Limits of Insurance provided in the Coverage Form.


Collapse -Coverage for direct physical loss or damage to covered property, caused by collapse of all or part of a building or structure insured if the collapse is caused by one or more of the following:

(1) Fire; lightning; windstorm; hail; explosion; smoke; aircraft; vehicles; riots; civil commotion; vandalism; breakage of glass; falling objects; weight of snow, ice or sleet;

(2) "Water damage", but only if the causes of loss are otherwise covered in this Coverage Form;

(3) Hidden decay;

(4) Hidden insect or vermin damage;

(5) Weight of people or personal property;

(6) Weight of rain that collects on a roof; or

(7) Use of defective materials or methods in construction, remodeling or renovation if the "collapse" occurs during the course of the construction, remodeling or renovation.


Scaffolding, Construction Forms & Temporary Structures -Coverage for direct physical loss or damage caused by scaffolding, construction forms and temporary structures, including fully enclosed office and tool trailers, but only while they are at a construction site you have reported to the insurance company. It will also cover the cost of re-erection of the scaffold.


Debris Removal -Coverage to pay your expenses to remove debris resulting from a covered cause of loss like fire. The expenses will be paid only if they are reported to the insurance company in writing within 180 days of the date of direct physical loss or damage.


Back-Up Or Overflow of Sewers, Drains Or Sumps - Coverage for loss or damage caused by water that backs up or overflows from a sewer, drain or sump from within the reported location.


Fire Department Service Charge - When the fire department is called to save or protect the insure property, the fire department may send service charges and that will be covered.


Valuable Papers & Records - Coverage for direct physical loss or damage to valuable papers and records caused by or resulting from a covered cause of loss like fire. When there is a duplicate, the insurance company will pay for the blank materials for reproducing the records and labor to transcribe or copy the records. When there is no duplicate, they will pay the costs to research, replace, restore or reproduce the lost information on lost or damaged valuable papers and records.


Pollutant Clean-Up & Removal – The insurance company will pay for expense to extract pollutants from land or water at locations reported if the discharge, dispersal, seepage, migration, release or escape of the pollutants is caused by or results from a covered cause of loss that occurs during the policy period. The expenses will be paid only if they are reported to us in writing within 180 days of the date from when the loss occurs.


Ordinance Or Law – Direct Damage – Coverage for loss or damage to the covered property as a consequence of enforcement of any ordinance or law like establishes zoning or land use requirements at the construction site.


Preservation Of Property - If it is necessary to move the covered property from the initial location, to preserve it from loss or damage, insurance company will pay for any direct physical loss or damage to that property:

(1) While it is being moved or while temporarily stored at another location; and

(2) Only if the loss or damage occurs within 30 days after the property is first moved.


Rewards - At the insurance company’s discretion, they may reimburse the insured as a reward for information which leads to the conviction of any one or more persons responsible for loss or damage.


Property at a Temporary Storage Location – The insurance company will pay for direct physical loss or while it is temporarily in storage at a location other than the initial reported.


Property In Transit – Coverage for loss or damage to the covered property while it is in transit.


Claim Preparation Expense – Coverage for the actual costs for reasonable and necessary claim preparation expenses, as requested by us for determining the amount of loss or damage, prior to finalizing a claim adjustment.


Contract Penalties - If the insured is a general contractor, insurance company will pay contractual penalties the insured is legally liable to pay under the provisions of a written construction contract signed prior to the start of construction for late or non-completion of construction due to direct physical loss or damage to covered property.