Builders Risk Insurance for Homeowners: Why a Permanent Property Policy is not Enough for Home Building and Remodeling

When homeowners remodel or build additions for their homes, they are often under the misconception that their homeowners insurance policy will provide all the insurance coverage needed for the construction project. Sometimes, contractors have the same misconception by overestimating the coverage offered by the homeowners existing policy. In reality, homeowners insurance does not provide comprehensive coverage for many types of exposures that come with residential renovation or remodeling projects.

Builders risk coverage is intended to insure a structure while it is under construction, protecting insurable interests in materials, fixtures and/or equipment to be installed. Builders risk policies offer several benefits, including higher coverage limits than those available through homeowners' policies and the option to extend the term of the insurance if additional time is needed on a construction or remodeling project.

One major benefit of builders risk insurance for renovation or remodeling projects is that the insurance coverage is broad, offering coverage for the project only or inclusion of the existing structure. The types of covered perils and losses are also much more extensive than those included in typical homeowners' policies. For example, builders risk policies cover theft of building materials, property in transit or at a temporary storage location, and damage caused by fire or lightning, wind or hail, vandalism or arson. Builders risk also covers scaffolding, debris removal, fire department service charges and can even provide up to $25,000 of reward money for intentional damages caused by theft or arson. Clients can choose to purchase coverage for contract change orders, so if they choose to upgrade materials mid-project and delay reporting to the provider, the upgrades will be covered by the insurance policy should a loss occur.

An additional consideration for your clients is that purchasing builders risk insurance can help to minimize the need to report claims to the homeowners policy insurance provider, ultimately helping the homeowner keep their ongoing insurance costs lower.

To learn more about the many benefits of using builders risk insurance and ensure your client has the best coverage for their construction project, check out our Builders Risk Insurance Checklist.

This is intended as a general description of certain types of insurance and services available to qualified customers. Your policy is the contract that specifically and fully describes your coverage. The description of the policy provisions gives a broad overview of coverages and does not revise or amend the policy.

Home renovation? Compare homeowners policies to builders risk.

Homeowners policies typically don’t cover the scope of exposures insured by residential builders risk. Those gaps can lead to financial implications should a loss occur. Read this guide to help you identify core differences between homeowners and builders risk insurance, and learn considerations for selecting the best option to protect your clients’ interests.

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