Skip to Content

Builder’s Risk for Contractors: Why and How?

by John Brown

Builder’s Risk for Contractors is a type of insurance that covers a building currently under constructed. The policy covers

  • The structure.
  • The materials on the site waiting to be installed.
  • And the material being transported to the job site.

Property replacement costs are paid by the insurer, but only up to the coverage limit. But, what does this mean for a contractor?

Builder’s Risk for Contractors: Why and How?

Builder’s Risk provides coverage for damage done to the insured structure. Coverage is for perils such as fire, wind, theft and many others. Builder’s Risk for contractors also lost profits. But the best part is:

It gives property replacement coverage.

It’s also important to know that Builder’s Risk does not cover. For instance:

  • Wind in the beach zone.
  • Accidents and injuries at the workplace.
  • General liability.

However, this next point is good to know. You can buy flood insurance and earthquake insurance separately.

Coverage should be purchase by the custom builder or general contractor, and may also be purchased by the property owner.

Who should buy builder’s risk insurance?

Custom builders, general contractors and property owners are the people that should buy builders risk insurance. Builders risk coverage is expected to show evidence of insurance that will comply with the state building codes and it is always required as a condition to many contracts. However, it is the homeowner who should have the builders risk insurance and many architects know this because they have already paid for the improvement to their land.

How long does it last?

The coverage ends when the building is completed or occupied, normally the insurance lasts for 3 –  12 months, but you can still extend it if the builder is not completed.

General Liabilty Insurance

Liability insurance is when a contractor covers their construction or installation. Whether you are a business operator with contract workers, or a home owner who just contracted someone to do work on your house, you need a contractor who has the coverage that will protect you from liability.

Liability insurance is a part of a general insurance system of risk financing to protect the insured from the risk of liability imposes by lawsuits and similar claims. Liability insurance is designed to offer specific protection against third party insurance claims e.g. payment is not typically made to the insured, but rather to someone suffering loss who is not a party to the insurance contract.

Designing and building a house structure can be a complex process involving many parties, which includes designers, engineers, building contractors, architects etc. In the past, contractor would hire third parties to handle different aspects of a project such as design work, but today many contractors provide these services in house.

Contractors liability insurance is designed to protect contractors from these risks. Policies are designed to cover risks not covered by commercial general liability insurance, which may not include professional liability execution. The professional liability policy offers third party liability protection. Contractors can buy a standard liability insurance policy that will cover all work that the contractor performs, but can also purchase a policy that covers specific projects with finite time frames.

General liability insurance is coverage that can protect you from a variety of claims including bodily injury, property damage, and personal injury that can arise from your business operations. As a small business owner or contractor, you are required to have some form of general liability insurance to safeguard your livelihood. Some employers might also require you to carry a certain amount of general liability insurance before you can work for them.

A single accident could result in a lawsuit that you may not be able to handle. A wonderful way to safe guard against this type of solution is to make sure you carry enough general liability insurance.

Limitations of Liability Insurance

Contractors liability insurance has its limitation. You must set a limit per each occurrence and limits for aggregate values. Limitations are also set for fire damage to property under construction as well as medical expenses for injured workers on the jobsite that might not be covered also include liability for personal injury.

Do I Need General Liability Insurance?

If you are a contractor, we understand you might need general liability insurance, and not a BOP. For example, you might not own any commercial building that requires property insurance or need to cover payroll or other operating expenses, but you are still exposed to liability risk in your job.

You may be asking, “who needs contractors insurance.” General contractors and subcontractors are commonly required to carry contractors insurance by the various laws and businesses they work for. Typical types of contractors insurance include:

Why Do I Need Insurance?

Contractor liability insurance is essential for construction companies. Any type of business involved in construction trade relies on general contractors insurance to keep their employees safe. Contractors and companies in this field need to carry this specialized type of insurance to protect themselves from unforeseen risks associated with their jobs.

Liability insurance will protect contractors, homebuilders and remodelers against property accidents, damage, injuries, and suffering on the job. While working on a construction project, workers can accidentally damage a property by mishandling material and tools or while remodeling process is under way. Common business standards require you to provide evidence of construction liability insurance before repairing homes; sub-contractors are also required to show their insured before entering or starting their participation in a construction job. If you don’t have it yet, click here to get an insurance quote for contractors liability.


Jeff Campbell