What is Builder’s Risk Insurance?
Builder’s Risk Insurance is an insurance policy that covers the building and materials while the house is under construction. It protects the property owner against fire, theft, vandalism, etc.
Why do I need it?
Reputable custom home builders will require a Builder’s Risk Policy and most lenders require proof of this insurance either at the construction loan closing or before work commences. It’s also just a good idea so the owner is protected against fire, theft, vandalism, etc. The builder should/will have coverage for their General Liability and Workman’s Compensation. Subcontractors are also required to carry specific levels of GL & WC insurance. This way, everyone is covered.
When do I need it?
That depends on the builder and the lender. NDI requires the policy to be in place before we commence construction. Some lenders require proof of insurance at the construction loan closing table while others require it before work starts.
Where can I get a Builder’s Risk Insurance Policy?
If you have an existing homeowner’s insurance policy, you can check with your carrier to find out if they offer a rider on your current policy that would fulfill the Builder’s Risk Policy requirements. You will also need to verify that the policy will cover theft while under construction (not always the case). This is a requirement for most builders. And for your own protection, you should also ask the agent if the policy includes liability insurance (something that is not always included in these policies). If your current provider doesn’t offer a rider, you can take out a separate policy with another insurance company. We recommend Brown’s Insurance Agency in Manassas, VA. They’ve been issuing these policies for years so they know what they’re doing. They are also very easy to work with which is important when it comes to insurance!
Is there a benefit to getting a policy separate from your homeowner’s policy/insurance company?
I say yes and this is why. When I built my home in 2008, there was a big storm that blew through Falls Church a week before we were scheduled to move in. A large tree in my neighbor’s yard fell across 4 other yards.
We were all thankful it didn’t hit any of our houses but it did damage our brand new fence.
We immediately contacted Brown’s Insurance Agency and within 2 weeks, we had been reimbursed for the repairs. It was easy and the best part about it was our homeowner’s insurance policy wasn’t “dinged” for the claim because we had taken out a separate policy with Brown’s Insurance Agency for our Builder’s Risk Insurance. I’m so glad we did.
What is the average cost of a Builder’s Risk Policy?
The cost of the policy is based on the cost of the house so it can vary. On average, our clients pay between $900-1200 for their Builder’s Risk Insurance. The policy is usually for a 12 month term. If you use Brown’s Insurance Agency and you don’t need the policy for the full 12 months, they will prorate the fee for the months not needed and give you a refund.
Money back when you’re building a new home? Now you don’t hear that very often (giggle).
Dream Big. Build Smart.