Why Homeowners Should Consider Builder’s Risk Insurance
If you’re planning a home remodel, you may be focused on design choices, contractor selection, and budgeting. However, one crucial aspect that many homeowners overlook is builder’s risk insurance. This specialized type of insurance can provide financial protection for your project, ensuring that unforeseen incidents don’t derail your investment.
What is Builder’s Risk Insurance?
Builder’s risk insurance is a type of property insurance that covers buildings under construction or renovation. It protects against damage caused by risks such as:
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Fire
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Theft
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Vandalism
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Weather-related events (wind, hail, lightning, etc.)
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Some types of water damage
This coverage typically applies to the structure itself, as well as materials, fixtures, and equipment on-site or in transit.
Do You Need Builder’s Risk Insurance for a Remodel?
For major renovations or additions, yes. Many standard homeowner’s insurance policies have limitations or exclusions regarding construction-related damages. If your remodel involves structural changes, extensive electrical or plumbing work, or a significant financial investment, a builder’s risk policy is worth considering.
Who Should Buy the Policy?
The responsibility for purchasing builder’s risk insurance can fall on different parties, including:
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The homeowner, if they are managing the project
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The contractor or builder, who may include the cost in their bid
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A lender, if the project is financed and insurance is required
What Does It Cover?
A well-structured builder’s risk policy typically covers:
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The existing structure (if included in the policy)
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New construction materials (on-site and in transit)
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Temporary structures (such as scaffolding and storage sheds)
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Cleanup costs in case of damage
However, it generally does not cover liability for injuries, worker’s compensation, or faulty workmanship—those are covered under different policies like general liability insurance and contractor’s insurance.
How Long Does Coverage Last?
Builder’s risk policies are temporary. They typically last 3 to 12 months, depending on the scope of your remodel. Coverage generally ends when the renovation is complete or the property is ready for occupancy.
How to Choose the Right Policy
To ensure you get the right coverage, follow these steps:
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Assess the scope of your remodel and its potential risks.
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Check your homeowner’s insurance to see if any coverage is already provided.
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Discuss with your contractor to understand who is responsible for coverage.
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Compare policies from different insurance providers for cost, coverage, and exclusions.
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Ensure compliance with your lender’s insurance requirements if using financing.
Conclusion
A home remodel is a major investment, and protecting it with builder’s risk insurance can provide peace of mind. By understanding your coverage options and ensuring the right policy is in place, you can safeguard your project from unexpected setbacks and financial loss.
Before starting your renovation, consult with an insurance expert to find the best policy for your specific needs. With the right protection in place, you can focus on creating the home of your dreams without unnecessary risk.
