Glossary Term

Builder’s Risk Insurance

What is Builder’s Risk Insurance?

Builder’s Risk Insurance is a specialized type of property insurance that covers buildings under construction. It provides protection against potential losses due to events such as fire, theft, vandalism, or weather damage during the construction phase. This insurance is essential for developers, contractors, and property owners to mitigate financial risks associated with building projects.

How Builder’s Risk Insurance Works

Builder’s Risk Insurance policies are typically customized to meet the specific needs of a construction project. Key features include:

  • Coverage Period: Policies are active for the duration of the construction project, usually until the building is completed and occupied.
  • Covered Property: Includes the structure under construction, materials, equipment, and sometimes temporary structures like scaffolding.
  • Covered Perils: Protects against risks such as fire, theft, vandalism, lightning, and windstorms, depending on the policy terms.

    • What Builder’s Risk Insurance Covers

    While coverage varies by policy, builder’s risk insurance generally covers:

  • Damage to the building under construction.
  • Loss or damage to construction materials stored on-site or in transit.
  • Costs related to debris removal and cleanup after a covered loss.
  • Temporary structures such as fencing, scaffolding, and trailers.

    • What Builder’s Risk Insurance Does Not Cover

    Certain risks and damages are typically excluded from builder’s risk policies, including:

  • Normal wear and tear or poor workmanship.
  • Employee theft or dishonesty.
  • Earthquakes or floods (these may require additional coverage).
  • Liability for injuries or accidents on-site (separate liability policies cover this).

    • Who Needs Builder’s Risk Insurance?

    Builder’s Risk Insurance is essential for:

  • Developers: Protect their financial investment in construction projects.
  • Contractors: Ensure materials and work are covered against unforeseen events.
  • Lenders: Often require this insurance to secure the value of their collateral during construction.

    • Tips for Choosing Builder’s Risk Insurance

    To ensure adequate coverage, consider the following:

  • Work with an experienced insurance broker to customize your policy for your project’s needs.
  • Understand policy exclusions and consider additional coverage if needed (e.g., flood or earthquake insurance).
  • Confirm the policy covers all parties involved, including contractors and subcontractors.

    • Builder’s Risk Insurance and LYNK Capital

    At LYNK Capital, we understand the importance of protecting your construction projects. Our lending solutions include guidance on securing builder’s risk insurance to safeguard your investments and ensure project success. Contact us today to learn more about our comprehensive lending options.

     
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    Private Lending Glossary - Builder’s Risk Insurance