Written by Wave Insurance | Published: February 2025
💡 WAVE Tip: Don’t Assume You’re Covered!
Many homeowners and builders think their standard home or contractor’s insurance covers a building under construction—but that’s usually not the case! Builder’s Risk Insurance is designed specifically to protect your project from risks like fire, theft, and water damage. Before you break ground, talk to a trusted insurance advisor to ensure you have the right protection in place.
When embarking on a new construction or major renovation project, protecting your investment is just as important as choosing the right contractor. Builder’s Risk Insurance is a specialized policy designed to cover the unique risks associated with buildings under construction.
Without proper coverage, unforeseen events such as fire, water damage, theft, or vandalism can result in significant financial losses. In this guide, we’ll break down what to look for in a policy, what to avoid, and why working with an experienced insurance professional is crucial.
What Builder’s Risk Insurance Covers
A well-structured Builder’s Risk Insurance policy provides comprehensive protection during the construction phase. Here are key coverages to look for:
1. Replacement Cost Coverage
Ensuring your building is insured to its full replacement value is critical. This guarantees that in the event of a total or partial loss, you can rebuild without financial strain.
2. Commercial General Liability (CGL) or Wrap-Up Liability
Liability protection is essential to cover third-party injuries or property damage related to construction activities.
3. Full Water Damage Coverage
Look for policies that provide full protection for flood and sewer backup damage, as these are common risks during construction.
4. Theft and Vandalism Protection
Materials, equipment, and appliances stored on-site are valuable and attractive to thieves. Ensure your policy covers theft and vandalism losses.
5. Soft Costs Coverage
Delays and unforeseen circumstances can result in additional costs such as increased carrying costs, professional fees, and permit reapplications. A policy with soft costs coverage helps mitigate financial setbacks.
6. Coverage for Existing Structures and Contents
If your project involves renovations rather than new construction, coverage for existing structures and their contents is vital in case of damage during the project.
7. Professional Claims Services
In the event of a loss, having access to professional claims services ensures a smoother and faster resolution, minimizing project delays.
Coverages to Avoid
Not all Builder’s Risk policies are created equal. Some policies come with restrictive endorsements or exclusions that can leave you exposed. Here’s what to watch out for:
Actual Cash Value (ACV) Instead of Replacement Cost – ACV accounts for depreciation, which means a lower payout at claim time.
Premises Liability Wordings – These may not provide adequate liability coverage for construction-related incidents.
Limited or Capped Water Damage Coverage – Water damage is a major risk, so avoid policies with restrictive limits.
Limitations on Theft, Vandalism, and Other Conditions – A policy with strict conditions or limits on theft and vandalism could leave you underinsured.
Warranties and Other Restrictive Endorsements – Some policies may have warranties that, if not met, can void coverage enhancements.
Why You Need Builder’s Risk Insurance
While most builds go smoothly, the reality is that construction sites are vulnerable to many perils. When things go wrong, they often go wrong quickly. Having the right Builder’s Risk Insurance in place ensures that your financial investment is protected from common construction-related risks.
Many standard home and commercial insurance policies do not cover buildings under construction. Failing to secure the proper coverage can lead to uninsured losses and difficulties in obtaining future coverage.
Builder’s Risk Insurance: How It Works
Temporary Coverage – Policies typically start with a minimum term of three months, with the option for monthly extensions as needed.
Changing Definitions of Renovation – Insurers frequently update what qualifies as a renovation. If the work is more than cosmetic, many home insurers require a Builder’s Risk policy.
Builders and Contractors’ Coverage Gaps – Even if a contractor claims you are covered under their policy, this often does not protect your financial interest in the property. A dedicated Builder’s Risk policy ensures first-dollar settlements for losses.
Work with an Expert
Builder’s Risk Insurance is complex and varies from project to project. Not all policies are “built” the same, so it’s crucial to work with a trained insurance professional who can guide you through the coverage options and ensure you are fully protected.
Reach out to one of our trusted insurance advisors today to discuss your project and get the right protection in place!
Have more questions? Contact us today! Toll Free: 1-855-809-5166 Email: hello@waveins.ca
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