Before You Start Renovating – Explaining “Builder’s Risk” Insurance

Are you looking to do a significant renovation to your home, such as a kitchen remodel or a guestroom addition? Maybe, you’re going one step further and creating an entirely new dream home. You wouldn’t want anything to happen to that project, but it’s important to note that your home insurance won’t actually cover a building under construction. So, what’s the solution?

Enter Builder’s Risk insurance. Builder’s Risk insurance, sometimes referred to as “Course of Construction Insurance” is designed to cover a building under construction, as well as any construction materials that are being used for the project, liability for any physical losses or damages, and more.

Before you start renovating, let’s break down this special type of insurance.

What is Builder’s Risk Insurance?

Course of Construction Insurance or “Builder’s Risk” is a form of insurance policy that is designed to protect your home property during the course of construction or renovation, from start to end. During this time, it protects your home against both physical losses and potential liability risks. Many home or business owners will be asked by the contractor or contracting company to protect their latest renovation or construction project by purchasing a Builder’s Risk insurance policy, especially as property claims can be costly. A property owner – whether business or residential – might be required to carry Builder’s Risk insurance for the following projects:

• Major renovations and remodelling
• Adding additional floors
• Property extensions
• New residential or commercial property

Who purchases Builder’s Risk insurance? Builder’s Risk insurance is not just for homeowners. The following list is comprised of parties that may benefit from this policy:

• Real estate developers
• Renovators
• General contractors
• Contracting companies
• Business owners
• Construction companies
• Homeowners

Starting a renovation project, or looking to build a new construction? Get in touch with McDougall’s Insurance brokers to discuss the possibility of acquiring a Builder’s Risk insurance policy.

Why Buy Builder’s Risk Insurance?

Do you really need Builder’s Risk insurance? Well, in an event where your contractor requires you to carry this special insurance, yes – you need Builder’s Risk. However, even if your contractor does not require you to carry Builder’s Risk insurance, imagine the following scenarios:

• Your roof is being restored, but poor sealing has allowed air to circulate through your attic, frozen with the temperature drop, and melted, causing water damage. A Builder’s Risk policy would cover the cost to repair the damages and restore the roof adequately.
• An addition is being made to your home and the materials are stored in a warehouse nearby. A storm breaks out and the resulting damages destroy all your stored materials. Your Builder’s Risk policy could cover the costs to replace the materials.

As you can see, there are a few situations where Builder’s Risk insurance can come in clutch. It may not always be mandatory, but it’s vital to have in situations where your project could be left on the hook.

What Does Builder’s Risk Insurance Cover?

Builder’s Risk insurance is designed to cover your construction materials and building under construction from common perils, such as the following:

• Fires
• Wind damage
• Falling objects
• Vandalism and theft
• Hail
• Rain

The coverage you receive from your Builder’s Risk insurance policy is viable from the moment you begin construction until construction has been completed. Note that the following may not be covered by a Builder’s Risk insurance policy:

• Damages after project completion
• Government activity
• Faulty design
• Mechanical breakdown
• Flooding
• Failure to meet terms of contract

Not all policies offer the same coverage. Discuss with your McDougall Insurance broker about what your Builder’s Risk policy may include.

Property Insurance vs. Builder’s Risk Insurance

Builder’s Risk Insurance and an ordinary property insurance policy are not the same thing. Property insurance is designed to cover your building as it stands from common perils, where Builder’s Risk only lasts throughout the duration of the construction and/or renovation process, and covers your buildings under-construction as well as any materials on-site. It can also cover your personal liability in the event of damages or losses throughout the construction period.

Builder’s Risk is a small added cost for big protection. Discuss its benefits today with McDougall’s expert insurance brokers.