Learn more about our Builder’s Risk Insurance coverage

I have general liability insurance for my new California based contracting business. I’m about to sign a deal to build a house and now my client wants me to buy Builder’s Risk insurance, too. What’s up with that?

Your client is probably concerned that something could happen to damage or destroy his home before he ever gets a chance to move into it. There could be vandalism, or a fire, or a lightning strike, or a storm with heavy winds.

Some kinds of damage are not automatically covered when you buy a builder’s risk policy. In California, earthquakes are always a concern. However, earthquake coverage, like water damage or wind damage to buildings in a beach area, usually requires special underwriting and is not automatically included in a builder’s risk policy.

Some builder’s risk policies may also provide coverage for expenses from completion delays, for example from contract change orders.

Builder’s risk insurance is a form of inland marine insurance.  (Don’t let the name fool you—no boats  are involved!)  In California, builder’s risk insurance can be purchased as part of an umbrella policy that includes excess liability and Workman’s Compensation insurance.

What if somebody gets hurt as a result of work being done on a site covered by builder’s risk insurance?

Builder’s risk insurance covers damage and losses during construction that are not covered under your general liability or California Workers’ Compensation policy.  A work-related injury to an employee would most likely result in a Worker’s Compensation claim. An injury to someone visiting the site, or the loss of property belonging to others, would come under your contractor’s general liability insurance.

Will one builder’s risk policy cover all of my new construction projects?

No, you will need a separate policy for each new construction project. You should have a policy in place before materials are purchased and delivered to the construction site because materials are covered in transit to the site and while stored onsite, as well as the building itself.

A California builder’s risk policy ends when construction ends and the structure is ready for occupancy. At that point, the owner must have property insurance in place to cover the structure.

Is builder’s risk insurance available only for new construction?

In California, builder’s risk coverage can be purchased for remodeling or renovation of an existing building as well as for new construction. For example, you might take out a builder’s risk policy before you build an addition to a house or do a major kitchen update.

However, builder’s risk insurance only covers vacant buildings, so it isn’t available if the owner plans to remain in the structure during construction.