Builder’s risk insurance can be defined as coverage that protects a person’s or organization’s insurable interest in materials, fixtures and/ or equipment being used in the construction or renovation of a building or structure should those items sustain physical loss or damage from a covered cause.
The term “builder” is misleading because insureds can include not only the contractor(s) performing the work, but the ultimate owner, lending institution and others. Suppliers of materials, although having an insurable interest in the property being used in the construction, are not normally candidates for builder’s risk insurance.
Moving into a newly constructed or renovated building is an exciting time. It’s the culmination of a complex undertaking, involving a spectrum of activity from land acquisition to architectural drawings, the first shovel full of earth to rolling out the fresh carpet. The final product is a major investment, certain to be protected with a well-designed insurance program.
Too often lost in the process, however, is consideration of the risks to which the project will be exposed while construction is underway. Fire, theft, vandalism, wind, lightning and other hazards are as much a threat to the project and construction site while work is in-progress as they will be to the finished structure.
Builder’s risk insurance provides this valuable protection. But it is a specialized coverage that can be unfamiliar to even experienced insurance professionals. In this issue of Adjusting Today, expert Donald Malecki discusses the key aspects of builder’s risk insurance, including who and what can be covered, the policies and options available, and questions that must be addressed in putting the right coverage into effect.
—Sheila E. Salvatore, Editor