5 Reasons Why You Need a Builder’s Risk Insurance Policy

Also known as course of construction insurance, a builder’s risk policy is a form of property insurance designed to protect contractors and property owners from the beginning to the end of any construction or renovation project.

As the construction and renovation season heats up, now’s the time for contractors to take stock of what jobs they will be working on this year and ensure they have the right amount of insurance to cover them if something goes wrong. 

Here are five reasons why every contractor or builder should have builder’s risk insurance and why it’s beneficial:

1. Protection for the Project

Builder’s risk insurance covers repairing an unfinished structure and replacing building materials and equipment from physical loss or damage. 

For example, severe weather like hail, lightning, high winds, or fire, vandalism, and theft affect the job site where you’re working. It also typically includes coverage for vehicle- and aircraft-inflicted damage to a property. We’ve received claims from clients because a vehicle smashed into their building.

2. You Choose the Coverage Limits You Need

Like any business insurance policy, you can choose the coverage limits and deductibles for your builder’s risk policy. 

As a rule, your coverage should reflect the value of the project you’re building. Turn to the budget for the project at hand as a guide to determine your policy’s coverage limit. 

Additionally, by choosing a higher deductible, you can reduce the policy’s annual premium cost. But if you go that route, be sure you have the necessary funds to pay a deductible if you must file a claim for damages.

3. Financial Security

A builder’s risk insurance policy is affordable, and in some cases, you can transfer the cost of the policy to the property owner. 

More importantly, it provides you with financial security. A typical policy costs significantly less than paying out-of-pocket for clean-up costs at a damaged worksite following a major storm or fire or if your materials or equipment are stolen or vandalized.

Moreover, a builder’s risk policy may cover any demolition expenses or the cost to clean up debris at the site following a fire or damages caused by severe weather.

4. It Minimizes Downtime

A contractor’s insurance policy typically includes general liability and commercial property coverage. However, those coverages will not pay for damages or losses for construction or renovation projects that are still underway. That’s what makes builder’s risk insurance unique. 

If there’s a loss during construction, builder’s risk insurance helps ensure that the project can continue without significant delays by paying to repair or replace damaged property using insurance proceeds, minimizing downtime and maintaining progress on the project.

Furthermore, you can include additional coverage for “soft costs” to the policy to cover expenses incurred from a delay that, for instance, results in having to extend any equipment rentals you require.

5. Risk Management

Builder’s risk insurance is a smart way to offset the risk you have with your construction or renovation projects.

By transferring the financial risk to an insurance provider, contractors can focus on completing projects successfully without worrying about unforeseen damage and loss incidents.

Protect Your Finances: Get Builder’s Risk Insurance

One accident or fire can set your construction project back by months and prove financially detrimental without a  builder’s risk policy. Since builder’s risk insurance is generally considered an all-risk insurance policy, most incidents are covered unless expressly excluded from a policy.

Any general contractor or property developer is responsible for buying a builder’s risk policy and ensuring any subcontractors hired are added as named or additional insureds on it.

Fill out our online application for a free builder’s risk insurance quote.

Through our partner network of over 50 Canadian insurers, Zensurance can quickly get the low-cost coverage you need and customize it to suit your project and budget.

– Updated April 26, 2024.