What are Builder's Risk Insurance Policies and Why are They so Misunderstood? One of the most complex aspects of any construction project is the insurance requirements.It can be a confusing pile of gobbledygook.And confusion can easily lead to misunderstandings and errors that cost project stakeholders time and money.

Out of all the different coverage types, builder’s risk is one of the most misunderstood.Although it’s become a standard coverage in the industry, many project owners and contractors still don’t understand the details.And many either don’t purchase it at all or end up getting a policy that doesn’t give them adequate coverage.

Let’s look at what builder’s risk is all about and some of the challenges.Builder’s Risk 101 Basically, builder’s risk coverage (a.k.a.“course of construction” insurance) protects an organization’s insurable materials, equipment, and other assets during a construction project.

More comprehensive policies can also provide theft, vandalism, flood, windstorm, earthquake, business income, and other coverages.Builders risk policies are generally available for new construction projects, remodels, and installations.Sounds simple enough, right? Unfortunately, that’s where the simplicity ends.

No single standard The first challenge with builder’s risk coverage is that not all policies are the same.There are differences in covered exposures and policy types from one insurance carrier to another, and even differences in policies offered by a single carrier.On top of that, most insurance carriers use their own policy forms with their own specific terms and conditions.

Bottom line: there is no single standard for builder’s risk policies.There are also a host of variables to consider when figuring out exactly what you need, who’s responsible for obtaining the coverage, and how each party’s interest will be protected.You may not even need a builder’s risk policy.

Depending on the details of the project – who the name insureds are, what the insurable interests of the various parties are, etc.– another property policy may provide similar or even better coverage than a builder’s risk policy.Why is builder's risk coverage becoming harder to get? In the ongoing battle to keep costs down, many developers still prefer building with wood frame construction on multifamily living projects because wood is cheaper than steel.

The caveat? Wood burns.So, as more wood frame structures are built, more fire losses happen during construction.And that makes builder’s risk coverage much more expensive, especially in places where the risk of wildfires is high.

Increased instances of arson are also partly to blame.What does the future hold for builder’s risk insurance? Here are a few trends in the construction industry that are affecting this coverage.Changing workforce, changing risks.

The shortage of skilled workers in the construction industry is increasing the risks for defects for contractors and developers.Many builder’s risk carriers have stepped up to offer educational materials, training programs, and helpful checklists for higher risk tasks.These can help contractors better train inexperienced workers and lower their risks.

Changing climate.Storms are increasing in intensity and frequency.Hurricanes are happening in areas that normally don’t have them.

And in normal hurricane zones, storms are increasing in magnitude.Is your builder’s risk policy keeping up with the increased risk of damages from a changing climate? Technology.From sensors that help deter theft and detect problems to drones that monitor a project’s progress, technology is helping the construction industry better manage risks and control costs.

One sure way to get it right Builder’s risk coverage has evolved and become the backbone of the insurance and contractual requirements on construction projects.But it can also be complex and easily misunderstood.That’s why it’s essential to work with an insurance agent who knows your industry.

At BNC Agency, we’ve been providing insurance coverage to the construction industry for decades.We have the solution for your builder’s risk needs and we can help you avoid costly liabilities and coverage gaps.Contact us to learn more.