How Much Does Builders Risk Insurance Cost?


Written by:  Howmuchisit.org Staff
Last Updated:  August 10, 2018

Builders risk insurance is designed to specfically protect builds that are being renovated or under costruction.  Coverage, depending on your policy, can include protection for the construction materials, HVAC equipment, labor costs and other construction-related expenses.

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hold” (CC BY 2.0) by  Michael Cory

How much does builders risk insurance cost?

On average, the cost of a builder’s risk insurance ranges anywhere from 1% to 5% of the total construction budget.  The exact cost depends on the level of coverage you need, the project type, your geographical location, the construction type and the insurance company you use.  A project within a flood zone or in an area prone to wildfires could cost more than a location with very few natural disasters.

TheBalance supports this price, stating the average range can be anywhere from one to four percent of the construction cost, but again, it will greatly depend on the type of coverage and exclusions within the policy.

Citizens General Insurance Brokers says the costs will depend on the time you need the policy, the geographical location, the type of construction and the policy deductible.  In the end, there really is no standard formula for pricing, according to the site.

Builders risk insurance overview

Builder’s risk insurance, sometimes known as “Course of Construction” policy, is a form of property insurance that covers buildings that are under construction, renovation, or repair as well as all of the equipment and materials used in the project.  It is designed for protecting the owner of the property and the contractor from loss of property on a building or a number of buildings under construction.  The coverage can be particularly important in case you are working with materials prone to damage, or when working in a region prone to certain kinds of severe weather conditions.  Typically, you will need to purchase coverage for 100% of the anticipated construction costs.

Damage from fire, wind, theft, lightning, hail, an explosion, vandalism or vehicles is often covered.  Limited coverage may also be available, depending on your policy.  This may or may not include earthquake coverage, employee theft, flood damage, war, a contract penalty, voluntary parting and/or a mechanical breakdown.  It’s always best to read the policy in its entirety to know for certain what’s covered and what isn’t.  According to TheHartford.com, for example, their policies include coverage for foundations, underground pipes, wires, machinery, fixtures, temporary structures, falsework, fencing, construction signs, landscaping, labor expenses, debris, profits and more.

The policy is set for a certain duration, which is usually up to a year, but if the project is still under construction when the policy expires, it can be renewed again.  Typical durations can last three, six or twelve months.  The coverage typically ends when the building is occupied and/or completed.

What are the extra costs?

Some builder’s risk covers include soft costs.  These are the expenses or reduced income resulting from delay in the completion of a project and include costs such as interest charges on project financing, workers overtime, advertising and promotion, realty taxes or other assessments, costs associated with lease renegotiations as well as accounting, architectural, engineering or legal fees.  Soft costs may be built in the insurance premiums, in which case the price will be higher, or added and charged as an additional premium.

If the policy has to be renewed, additional costs have to be considered.

Builders risk insurance will not cover injuries on the job site.  To cover accidents, a separate liability policy will have to be purchased.

Other optional coverage may include earthquake coverage, flood coverage, legal fees, license fees and/or additional expenses that cover business income.

Tips to know:

Normally, builders risk insurance contract specifies the owner of the property, the contractor, as well as any sub-contractors to be insured.  Whether the owner or the contractor will be the one responsible for obtaining the insurance cover will depend on the contract.  In case the contractor is the one responsible for obtaining the insurance policy, it can be added to the contractual cost.  To ensure that the policy terms and limits are suitable, the contractor and brokers need to review the building contract, construction schedules, financing agreements, and other related documents.

If this is the first time that you, as the property owner, has been in this position, it would be best to find a contractor that will take care of the insurance for you.  This company should already have plenty of experience with this type of insurance and most likely already has a company with which they work on a regular basis.

When choosing a policy, make sure that you find out how fast they will pay out claims.  If you are on a construction timeline, a slow payment process can slow down the job.

In most cases, the insurance won’t cover sub-contractors, tools, equipment, professional liability and accidents at the job site.

Many insurance companies often want a builder to have at least two years in construction experience to approve them for a policy.

How can I save money?

You should work with a professional commercial insurance broker or agent experienced in setting up builders risk insurance to get the amount and type of builders risk coverage you need at the most affordable rate.


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