Builders risk insurance explained

Builders risk insures the thing being built. Fire, wind, theft of materials, vandalism, collapse during construction — property damage to a structure that does not yet exist as a finished building, and therefore cannot sit on a normal property policy.

It is not liability cover. If a passer-by is injured, that is general liability. If the half-built structure burns down, that is builders risk. Both, on most jobs.

Whoever the contract says. On residential work the owner often carries it; on commercial work the general contractor often does. What matters is that somebody does, and that everyone with an interest is named — owner, general, lender, and frequently key subs.

A builders risk limit is normally the completed value of the project — what the finished structure will be worth, not what has been installed so far. The premium reflects that the exposure grows through the build.

Our builders risk calculator takes completed value, term and deductible and returns the band those three imply, before location loading.

Four things a standard policy usually leaves out, each of which can be added — and each of which is expensive to discover after a loss.

• Soft costs. Extra interest, extra rent, redrawn plans, additional permits. The rebuild is covered; the delay around it is not, unless soft-cost cover is added.
• Off-site and in-transit materials. The generator stolen from the yard before it reached the job, or off the truck.
• Faulty workmanship. The bad work is excluded; resulting damage to other property may not be — read the wording, this varies more than any other clause.
• Water and earth movement. Flood and earthquake are usually separate, in every zone.

A builders risk policy terminates on an event, not just on a date: occupancy, acceptance, or the expiry of the term — whichever comes first. Partial occupancy of a finished wing while the rest is under construction is the classic trap; some wordings end cover for the whole project at that moment.

Two dates need to meet: the day builders risk ends and the day the permanent property policy begins. Any gap is uninsured, and a project handed over on a Friday with a policy starting Monday is a real, and common, three-day hole.