Builder’s risk insurance, or course of construction insurance, is an often-overlooked type of business insurance coverage that aids in the protection of ongoing construction projects. It’s a unique insurance product, given that it only lasts for the duration of the ongoing project and is priced at a percentage of the total project cost. It is not a standalone policy. You will need sufficient insurance outside of builder’s risk insurance to also protect your business property, vehicles, employees, liability, and more.
But, like all projects, budget is always a question – and where does builder’s risk insurance fit into all that? How much does builder’s risk insurance cost? After all, you’ll need a rough approximation to accurately gauge your overall budget for the project – insurance being one of the many, many costs that are included with the final estimate.
In this blog, we delve into the factors that influence builder’s risk insurance costs, explore typical cost ranges for different types of construction projects, and more. Additionally, we’ll discuss additional coverage options, such as soft costs coverage and equipment coverage, to help insure your upcoming or ongoing construction project even more.
Factors Affecting Builder’s Risk Insurance Cost
Builder’s risk insurance is governed by a vast array of different factors, all of which boil down to the overall value of the property being insured. Some of those factors include:
- Location of the project
- Total cost of the project
- Length of project time (estimated)
- Total area of construction site
- Quality of building materials
- Amount of coverage being purchased
- The experience of the project team
- Where materials are being stored
- Environmental factors
- Surrounding risks
- Deductible amount
Builder’s risk insurance may vary based on the factors above, and further depending on extenuating circumstances. The more the project costs, the higher quality the build, and the higher the “stakes,” the more you can expect your builder’s risk insurance to inevitably cost.
Typical Cost Ranges for Builder’s Risk Insurance
Unlike your traditional insurance premium “ranges,” builder’s risk insurance is not presented as a numerical amount so much as a percentage of the total project cost.
The cost of builder’s risk can vary significantly depending on several factors, as defined in the previous section. This means that it’s very difficult to gauge an “average price.”
Additionally, the cost may differ between residential and commercial projects. It’s important to gather project information and request quotes from multiple insurance providers to get accurate pricing – which Vago can do for you. Generally, builder’s risk insurance premiums can range from 1% to 5% of the total construction budget. This may mean your policy can cost only a few hundred dollars, or several thousand (depending on the extent of the project.)
Who pays for builder’s risk insurance?
Funnily enough, who pays for builder’s risk insurance is largely dependent on the unique construction project in question. It is generally expected, for the most part, to be paid for by the property owner, but in some circumstances the insurance premiums for the policy are built into the builder’s contractor and (in this case) are contractually required to be provided by the actual builder.
If you are a homeowner undertaking a construction or renovation project at your own property, you will also be responsible for acquiring a builder’s risk insurance policy and securing it before you even begin any actual work on your building. Failing to acquire adequate coverage, whether that’s builder’s risk insurance or any other kind of insurance, leaves your business vulnerable – which can result in additional costs later down the line, and can damage your business’ reputation irreparably. We always recommend getting in touch with a provider before any actual construction begins – even if you’re just a homeowner doing their own roof repairs!
Additional Considerations and Coverage Options
Builder’s risk insurance is not the be-all, end-all when it comes to insurance coverage for construction projects and renovations. To be fully insured against potential losses, you may wish to consider the addition of other coverages and endorsements to fully supplement your protection plan.
Some examples include:
- Soft costs coverage – Soft costs refer to expenses that are not directly related to physical construction but are still crucial for a project’s success. This coverage can include expenses like architectural and engineering fees, permits, legal fees, and interest on loans. Understanding the extent of soft costs coverage available in Builder’s Risk Insurance policies can help ensure comprehensive financial protection.
- Equipment coverage – Construction equipment and tools are valuable assets that are susceptible to theft, damage, or breakdowns during the construction process. Equipment coverage within a builder’s risk insurance policy can help protect against these risks, providing reimbursement for repairs or replacement of damaged or stolen equipment.
Builder’s risk insurance is not a standalone policy and cannot cover every possible loss that could occur on a jobsite. You will need liability coverage, commercial property coverage, commercial automobile coverage, and much more to fully insure your operations.
Vago can help you get what you need, as a dedicated MGA based in Quebec, Canada. Our coverage options are designed to offer financial protection against a huge range of common risks. Our experienced underwriters will work with you create a custom policy that meets the needs of your upcoming or ongoing construction project.
