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.

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.

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).