Why You Need Builder’s Risk Insurance for Your Home Renovation Project
Staying with the theme of major home renovations, there’s one insurance issue that’s often misunderstood and, therefore, neglected: Be sure your project is covered with a builder’s risk insurance policy. And to be clear, these days, in spite of the name of the product, the most common arrangement is for the homeowner to obtain this coverage.
Here’s what you need to know about builder’s risk insurance.
What is builder’s risk insurance?
Builder’s risk insurance protects against theft, vandalism, or weather-related damage to construction-related supplies, materials, tools, and other equipment at a residential construction site. It’s most commonly associated with new home construction, but it’s also strongly recommended for significant home renovation projects that incorporate new materials and utilize specialized tools and equipment. Builder’s risk insurance doesn’t take the place of a contractor’s obligation to carry general liability insurance.
Homeowner’s insurance doesn’t provide the same coverage as builder’s risk insurance
For a home renovation, homeowner’s policies don’t offer the same protection as builder’s risk insurance. In fact, major renovation projects often aren’t even covered by a homeowner’s policy. And in any case, home improvements done under a homeowner’s policy usually have a limited duration and can’t be extended if project delays occur. In contrast, your builder’s risk policy can be in place for as long as a year – and then extended or renewed beyond that if necessary.
Also, builder’s risk policies have higher coverage limits than you can obtain through a homeowner’s policy, and they also provide a greater scope of coverage. Trying to secure similar levels of coverage through endorsements to the homeowner’s policy is hit and miss – and it’s easy to miss important elements. There’s one other scenario to remember: certain provisions of a homeowner’s policy can lapse if the owner vacates the home during the renovation.
Misconceptions about builder’s risk insurance
“My homeowner’s policy will be sufficient to cover the remodel project.”
False. We address this in detail above, but it bears repeating. Homeowner’s policies aren’t designed or adequate to protect you for losses stemming from a home renovation project.
“I know I need the policy, but I’ll get if after the work starts.”
That’s not a good idea. Once you start a construction project it can be difficult to secure builder’s risk coverage. This could force you to seek out a non-standard carrier, ending up with a much more expensive arrangement.
“It’s the contractor’s responsibility to secure the builders risk insurance”
Be careful. While some contractors may indeed secure a policy, that’s not typical these days. They expect you to obtain it. And even if the contractor does have coverage, its good practice to have your own builder’s risk policy in case the contractor isn’t fully covered.
“Builder risk insurance is too expensive”
That’s a matter of perspective. Consider the fact that the second most frequently filed claim under a builder’s risk policy is for theft. But many homeowner’s policies don’t insure for theft in a dwelling that’s under construction or undergoing major renovation. In these cases, without builder’s risk insurance, you’d be paying to replace the stolen or vandalized material and equipment out of your pocket.
Key takeaway: Builder’s risk insurance gives you peace of mind that you won’t be left on the hook if supplies and equipment are stolen or damaged at your home renovation jobsite.
Don’t take chances. Contact one of our policy experts to discuss your builder’s risk insurance options for your home renovation project.