Understanding Builders Risk Insurance — What It Covers and What It Doesn’t

Builders risk insurance—also known as course of construction insurance—is a specialized type of property coverage designed to protect buildings, materials, and equipment during construction or renovation. Whether you’re a contractor, property owner, or developer, understanding what this policy covers (and what it doesn’t) is critical to managing risk and avoiding costly delays.

At Plumtree & Brunner, LLP, our California construction lawyers know there is always a balance between risk and reward you must consider. Builders risk insurance helps mitigate many of those common concerns. We also help you know how these limit your liability and protect your business in other areas, so speak with us today.   

What Does Builders Risk Insurance Cover?

Builders risk insurance can be very helpful for your California construction company. It is meant to protect you against damage or loss to a construction project. It especially helps with certain types of damages, such as:

• Fire
• Lighting
• Wind and hail
• Explosions
• Theft or vandalism
• Water damage
• Construction accidents
• Collapses
• Protection for temporary structures
• Soft cost protections

Coverage is usually customizable to fit your needs. You can consider factors like the value of what you’re protecting, the project type, and even its duration. You can negotiate policies that work for you in many cases. 

What Builders Risk Insurance Won’t Cover

While builders insurance does help you protect a lot, it won’t protect everything. There are many limitations most policies do not include. Your attorney can help you identify gaps and address them accordingly. 

• General Liability or Injuries to Workers: This insurance focuses on property, not people. Worker injuries or third party injuries will be handled differently, such as through workers’ compensation or personal injury lawsuits. Different insurance policies can be purchased for these risks.
• Defective Workmanship or Design Errors: Bad construction or defective plans are covered differently, not under builders risk insurance.
• Contractor Tools and Equipment: While materials may be covered, what your contractor owns is not usually part of your policy, unless you add it in specifically. 
• Acts of War, Terrorism, or Government Action: This is a standard exclusion in nearly every insurance policy.
• Earthquakes and Floods: Many natural disasters are excluded. However, you may be able to negotiate a policy that covers either or both of these, especially considering their prevalence in California. 
• Normal Wear and Tear: Things degrade over time, and are not usually covered for this.
  

Who Needs Builders Risk Insurance?

Companies and individuals that buy builders risk insurance most commonly include, but are not limited to:

• Property owners or developers
• General contractors
• Subcontractors (in some cases)
• Lenders requiring coverage as part of financing

The named insured can vary depending on the contract structure. 

How Long Does Coverage Last?

Builders risk insurance is temporary. It begins when construction starts and ends when:

• The project is completed
• The building is occupied
• The certificate of occupancy is issued

You may seek an extension if your project is delayed, but carefully review your policy to see how this works. Don’t assume it continues to cover you if things change. 

Tips for Picking the Right Builders Risk Insurance Policy

• Assess your project’s risks 
• Choose coverage limits that cover the full value of the completed structure
• Review exclusions carefully
• Consider endorsements for flood, earthquake coverage
• Determine whether you should include contractor equipment
• Coordinate with other policies like general liability and workers’ comp to avoid gaps in protection.
• Work with an experienced California construction attorney who understands construction risks and local regulations.

Better Understand Builders Risk Insurance and How It Can Help Your Company

Construction is a risky business, in many different ways. You can mitigate that risk with the right legal team at your disposal, as well as the right risk insurance. Understand the scope of your policy and enforce your rights when you need to make a claim. We are here to help. 

Our team at Plumtree & Bruner, LLP helps you enforce your rights under an insurance policy and plan for risk mitigation across the spectrum. Contact us today for a consultation.