Builders’ Risk Coverage Form: Definition & Meaning

KEY TAKEAWAYS

• A builders risk coverage form is a type of insurance policy.
• It covers commercial and residential structures whilst they are under construction, are being renovated, or are being remodeled. 
• The coverage form includes hazards to the building structure and various building components.

What Is a Builders Risk Coverage Form?

A builders risk coverage form is a type of insurance policy. It covers both commercial and residential structures whilst they are under construction. It also covers them if they are being renovated or remodeled. 

A reporting or a completed value form is where the policy will appear. This is because there isn’t a standard form or a contract that has to be filled out.

The builders risk coverage form is also known as a builders’ risk policy. 

What Does a Builders Risk Coverage Form Cover?

A builders risk coverage form includes a number of things. It will include hazards to:

 The building structure

• Machinery
• Equipment
• Material and supplies

In terms of the building components that are covered, it will include:

• Foundations
• Fixtures
• Machinery
• Equipment used to service the building
• Building material and supplies
• Debris removal in the event of a loss

The things that the coverage form doesn’t cover include:

• Injuries or accidents that occur on the job site
• Land
• Landscaping
• Satellites or antennas
• Constructions materials that are in transit
• Scaffolding
• Construction trailers
• Theft of supplies from the site

Although some of these things that aren’t automatically covered can be obtained via additional coverage. This is at the price of increased premiums as an extra expense. 

There are also what is known as soft costs. These are covered under commercial builder’s risk for commercial projects. They include things such as advertising, real estate taxes, and design fees. 

Policies will not insure against certain events. Though this is mostly the same across the insurance industry. The events that are excluded are:

• Acts of war
• Government seizure
• Nuclear hazards
• Extreme weather events such as floods, earthquakes, and mudslides. 

How to Obtain a Builders Risk Coverage Form

Insurance agents can complete the policy by using a reporting form. They can also use a completed value form or an inland marine coverage form. There are two ways in which an agent can write builders’ risk coverage.

The first way is a policy that covers specifically listed losses. And the second is a policy that includes everything. Other than items that have been specifically excluded. For an extra premium, a policyholder can add some of the excluded items to the policy. 

The limit of the coverage allowed is determined by the value of the project when it is completed. You must purchase the policy when the project is in its infancy. This tends to be when it is less than 30% complete. It will list a level of completion when coverage ends automatically. The other events that trigger a premature end to the coverage include:

• The property transfers possession to the property owners
• The project is abandoned
• If the project isn’t worked on for a period of 60 days
• After a specific number of days of occupancy
• When the construction has been completed for 90 days

However, if an event that is covered by the policy delays construction, then an insurance provider may cover for this time. This type of policy requires builders to have a certain level of experience, depending on what type of coverage is being applied for. 

Summary

When working on a construction project, it’s very important to be at least somewhat covered. This means that if anything occurs that could incur a large cost, you won’t have to pay completely out of your own pocket. That’s why a builders risk coverage form can be incredibly helpful.