Builders Risk Insurance for Contractors and Subcontractors
Builders Risk Insurance (also known as Course of Construction Insurance) is a type of property insurance that is required when starting a construction project. Whether it’s a renovation on a home, or a ground up build for a new Condominium project a builders risk policy is needed to cover any losses related to the project for physical damage. Types of claims that are covered are those cause by perils such as fire, theft and water damage. This policy is put into effect once construction begins and is kept in place until the property is ready for its intended use or occupancy.
It provides coverage up to the policy limit which is determined by the total value of the completed project, including all materials and labor costs. The construction budget is the most accurate and preferred document to determine policy limits and is composed of hard costs (labour, material and equipment) and soft costs (finance, additional interest, leasing and marketing, legal and accounting and other carrying costs).
Builders Risk Insurance covers anyone who has an insurable interest in the project such as the property owner, general contractor, construction manager and sub-trades.
3 Types of Builders Risk Insurance Coverage to Consider
DE5 Design Coverage
Provides coverage for all damage due to a defective condition. However, it excludes the additional costs of improvement to the original design, plan, specification and material.
Delayed Start Up (DSU)
Covers the loss of income or potential income in the event the construction project is delayed due to physical loss or damage.
Soft Costs Coverage
Covers costs not related to the physical construction of the project but are still crucial items to the build such as: professional fees, marketing and realty taxes. This coverage is not added on automatically, it needs to be requested.
Who needs Builders Risk Insurance?
Any owner or contractor looking to begin a construction project such as new builds, additions, renovations, reconstruction or installation should obtain Builders Risk insurance. This product can be used to protect projects across construction sectors including residential, commercial and institutional. It can also be an insurance requirement from various sources.
For example, a high-rise condominium developer will be required to have insurance by their lender before any funds are released. Insurance is also a requirement for general contractor’s signing a CCDC contract with a municipality or school board.
FCA specializes in Builders Risk insurance to ensure the proper limits and applicable coverages for your projects are insured and are experienced in working with various stakeholders requiring coverage on your projects.
Are you signing CCDC Contracts?
Many of the standard CCDC construction contracts, including the CCDC 2 and 5B, reference the CCDC 41 Insurance Requirements document. This document outlines the various insurance requirements for contractors. Included in these requirements is ‘Broad Form’ Property insurance. Broad Form Property insurance is also known as Builders Risk Insurance or Course or Construction Insurance. Regardless of the size or scope of your contract, if you are signing a CCDC contract that references the CCDC 41, then you are contractually required to purchase a Builders Risk policy.Get a Quote
How much does a Builders Risk policy cost?
The cost of a Builders Risk policy varies depending on the project. Each project has its own unique risks and therefore the risk will be assessed differently by the insurance company.
Common factors that impact cost include:
- Scope of project (new build vs reconstruction)
- Project term (most are calculated on a monthly basis; longer term projects can be more expensive)
- Amount of coverage required (determined by the hard and soft costs on the construction budget)
- Type of construction (wood framed vs concrete)
- Location (is the project protected by a fire hydrant or is it close to any large body of water?)
- Experience of the parties involved (an owner or contractor’s history of similar projects gives the insurance company more confidence to providing competitive terms).
FCA is Canada’s Construction Insurance Expert Since 1919
FCA has been providing Canadian companies with commercial insurance since 1919. We have set the industry standard for turnaround time for both new and existing clients. We pride ourselves in ensuring our clients are receiving the best suite of coverages at a fair price.
To get started with your liability coverage, you will need to complete a Builders Risk application. More complicated projects will require further information including:
- Site Plan
- Construction Budget
- Construction Schedule
- Geotechnical Report
- Environmental Site Assessments Phase 1 and Phase 2
The insurance company is focused on analyzing the project and determining any potential claims that can arise. This information outlines and allows for understanding of the full scope of your project. They also look for experience in building similar projects. Having experience or hiring an experienced contractor for your project makes the insurance company more comfortable and the result can be favorable terms.
It is often debated when a Builders Risk policy should start. For a new build construction, the Builders Risk policy should start when the footings are being poured. For other types of projects, such as reconstruction, the Builders Risk policy should start once construction begins. However, this is subject to change if a lender or consultant is involved as they may want proof of coverage or a certificate of insurance before funding the project or allowing any contractor on site.
A Builders Risk policy is a requirement under the CCDC 41 insurance requirement section. Any general contractor or sub-trade signing this type of contract should be aware of this requirement. The Builders Risk policy is project specific so a contractor needs to incorporate this additional cost when preparing their bid for a project.
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FCA did a great job in assisting me throughout the process. Not only from a bonding aspect but other aspects to relating to attaining approvals, builder’s risk insurance and other financial approvals. Would definitely and highly recommend them.
FCA covers us for all our business requirements, from equipment to liability, property, builds and everything in-between. Errol Williams is so patient and helpful; I am always confident that we are getting the best possible coverage at a competitive rate. Always the best service!
Jamie and his team have been great to deal with, providing transparent advice and excellent service!
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