How to Insure Builders Risk Policies for Building Additions: Top Insights 2025

How to insure builders risk policies for building additions is a common question for homeowners starting on construction projects. Here’s what you need to know:

• Understand the Coverage: Ensure that the policy covers both the existing structure and the new addition.
• Select the Right Policy Term: Choose from six, nine, or 12-month terms based on project timeline.
• Check Eligibility: Projects like major remodels typically qualify, but historical homes may not.
• Consider Additional Coverage: Options include protections for green building endorsements and theft.
• Direct Billing Options: Look for insurers offering installment payment plans.

Whether you’re constructing a new sunroom or expanding your kitchen, understanding how to insure builders risk policies for building additions is crucial. This specialized insurance safeguards residential and commercial properties during renovation or construction, protecting against risks such as theft, vandalism, and damage from unexpected events.

At Stanton Insurance Agency, located in Massachusetts, New Hampshire, and Maine, we prioritize trusted protection. For over a century, we’ve helped clients secure their most valuable assets. My name is Geoff Stanton, and as President of Stanton Insurance with a specialization in commercial property and liability, I have extensive experience assisting homeowners in understanding how to insure builders risk policies for building additions.

How to insure builders risk policies for building additions further reading:
– builders risk endorsement
– builder’s risk insurance policy
– what does builders risk cover

What is Builders Risk Insurance?

Builders risk insurance is a specialized type of property insurance designed to protect buildings and structures during construction or significant renovations. It acts as a safety net for your construction project.

Temporary Policy

This insurance is temporary and lasts only for the duration of the construction project. Once the building is complete, the policy ends. You can choose from different policy terms, such as six, nine, or 12 months, depending on your project’s timeline.

Course of Construction

During the course of construction, many things can go wrong, such as weather damage, theft, and vandalism. Builders risk insurance helps cover these unexpected events, ensuring that you won’t have to pay out of pocket for repairs or replacements if something goes wrong.

Financial Protection

The main goal of builders risk insurance is financial protection. It covers the costs of materials, equipment, and even some labor if they are damaged or lost during construction. This policy can also cover additional expenses like debris removal and soft costs, such as interest on loans and architectural fees.

Builders risk insurance is a crucial part of any construction project. It offers peace of mind and financial security, allowing you to focus on building your dream home or commercial space without worrying about unexpected setbacks.

How to Insure Builders Risk Policies for Building Additions

Insuring builders risk policies for building additions involves understanding the necessary coverage to protect your investment. Whether you’re adding a new room or renovating an existing structure, here’s what you need to know:

Coverage for Buildings Under Construction

During construction, buildings face risks like weather-related events and vandalism. Builders risk insurance covers the structure itself, including materials, equipment, and fixtures. This protection is crucial since parts of the building are more vulnerable until the project is complete.

Coverage for Materials and Supplies

Materials and supplies are often stored in temporary structures or left exposed, making them targets for theft or damage from the elements. Builders risk policies include coverage for these materials, whether they’re on-site, in storage, or in transit to the construction area.

Property in Transit

Transporting materials and equipment is risky. Auto accidents can lead to significant losses, especially if costly equipment is involved. Builders risk insurance covers these transportation risks, ensuring that you’re not financially responsible for damages while moving materials to and from the job site.

Debris Removal and Cleanup

After a catastrophic event like a fire or windstorm, cleanup can be expensive. Builders risk insurance includes coverage for debris removal, which can cost anywhere from $10,000 to over $100,000. This ensures that you can clear the site and resume work without financial strain.

Soft Costs and Business Income

Delays due to construction damage can lead to additional expenses. Soft costs like extra interest on loans, real estate taxes, and architectural fees can add up. Builders risk insurance helps cover these unexpected costs, safeguarding your project’s budget and timeline.

Understanding these components ensures that your builders risk policy covers all aspects of your building addition, providing peace of mind and financial security throughout the construction process.

Builders Risk vs. General Liability Insurance

When diving into insurance for construction projects, it’s crucial to understand the difference between builders risk insurance and general liability insurance. Each serves a unique purpose and is vital in its own way.

When to Use Builders Risk Insurance

Builders risk insurance is like a safety net for your construction project. It’s a temporary policy designed to cover a specific project from start to finish. This policy is essential for protecting new structures and major remodeling projects from property damage due to unforeseen events like fire, theft, or weather-related incidents.

Here’s when you should consider using builders risk insurance:

• Construction Projects: Whether you’re building a new office or doing a major remodel, this insurance is your go-to for covering materials, equipment, and structures under construction.

• New Structures: If you’re constructing a brand-new building, builders risk insurance is a must. It covers the entire project, ensuring that any investment in materials and labor is protected.

• Major Remodeling: Even if it’s not a brand-new build, significant renovations still carry risks. Builders risk insurance can cover these too, ensuring that your investment is secure.

• Lender Financing: Often, lenders will require builders risk insurance to protect their financial interest in the project. This policy ensures that both you and the lender are covered in case of a loss.

When to Use General Liability Insurance

General liability insurance is more like an ongoing shield for your business. It provides long-term coverage against liability risks such as customer injuries or property damage that occur on your premises or as a result of your operations.

Consider general liability insurance in these scenarios:

• Customer Injury: If a customer slips and falls at your construction site, general liability insurance covers medical expenses and any legal settlements.

• Property Damage: Accidental damage to a third party’s property during your operations is covered, helping you avoid financial strain from repairs or replacements.

• Legal Defense: Should a lawsuit arise from a covered incident, this insurance handles your legal defense costs, including court fees and settlements.

• Settlements: If a claim leads to a settlement, general liability insurance steps in to cover the costs, protecting your business’s financial health.

In summary, while builders risk insurance is essential for protecting the physical aspects of a construction project, general liability insurance safeguards your business against liability claims. Both play a critical role in ensuring that your construction projects and your business remain financially secure.

Frequently Asked Questions about Builders Risk Insurance

Can you add an additional insured to a builder’s risk policy?

Yes, you can add an additional insured to a builder’s risk policy. This is a common practice to protect various parties involved in a construction project. For instance, if you’re working with subcontractors or suppliers, you might want to list them as additional insureds. This ensures that they are covered under the policy if a claim arises from their work or materials. Adding an additional insured can be done through a policy endorsement, which extends coverage to individuals or groups not initially named in the policy.

How to calculate builders risk insurance?

Calculating builders risk insurance involves determining the total completed value of the construction project. This value includes the cost of materials and labor but excludes the land value. It’s crucial to accurately report this value to avoid penalties due to underinsurance.

Here’s a simple breakdown:

• Materials: Consider all materials that will become a permanent part of the structure.
• Labor: Include all labor costs associated with the construction.
• Land Value Exclusion: The value of the land itself is not part of the builders risk insurance calculation.

To ensure you’re not caught off guard by a 100% coinsurance clause—a common feature in these policies—it’s advisable to be conservative with your estimates. Underreporting the project’s value could result in a significant portion of a claim going unpaid if a loss occurs.

What is an example of builders risk insurance?

Let’s explore a real-world scenario to understand how builders risk insurance functions:

Imagine a construction site where a new office building is underway. One night, vandals break in and cause damage, including drywall repair needs and equipment theft. Additionally, broken pipes from the vandalism lead to water damage. In this case, builders risk insurance would cover the cost of repairing the drywall, replacing stolen equipment, and fixing the water-damaged areas. This type of insurance acts as a financial safety net, ensuring that the project can continue without bearing the full brunt of unexpected costs.

Understanding these key aspects of builders risk insurance can help protect your investment in building additions and ensure a smooth construction process.

Conclusion

In summary, builders risk insurance is a crucial safety net for anyone involved in construction projects, particularly when it comes to building additions. This type of policy provides financial protection against a variety of risks that can occur during construction, such as theft, vandalism, and weather-related damages. By covering materials, equipment, and even potential project delays, builders risk insurance ensures that unforeseen events don’t derail your project or significantly impact your budget.

The importance of having the right coverage cannot be overstated. Without it, you could face substantial out-of-pocket expenses that could jeopardize your construction timeline and financial stability. For example, if a storm damages your construction site, the costs for debris removal and repairs can be overwhelming. Builders risk insurance helps mitigate these risks, allowing you to focus on completing your project without financial stress.

At Stanton Insurance Agency, we understand the complexities involved in insuring construction projects. Our team is dedicated to providing trusted protection for your valuable assets, ensuring that you have the coverage you need to keep your projects on track. Whether you’re starting on a new build or adding to an existing structure, we offer customized builders risk insurance solutions custom to your specific needs.

Don’t leave your construction project vulnerable to unexpected setbacks. Contact us today to learn more about how we can help you secure the right builders risk policy for your building additions. With Stanton Insurance Agency, you’re not just getting an insurance policy—you’re gaining a partner committed to safeguarding your peace of mind.