Who Pays for Builder’s Risk Insurance?

Builder’s risk insurance, also known as “course of construction insurance,” is a specialized type of property insurance that covers buildings under construction. This insurance is crucial for protecting the financial interests of all parties involved in a construction project, including property owners, contractors, and subcontractors. But who exactly is responsible for paying for this insurance? Let’s dive into the details.

What is Builder’s Risk Insurance?

Builder’s risk insurance provides coverage for buildings and structures while they are being built. It typically covers damages from events like fire, theft, vandalism, and certain weather-related incidents. The policy can also cover materials, supplies, and equipment used in the construction, whether they are on-site, off-site, or in transit¹.

Who Needs Builder’s Risk Insurance?

Anyone with a financial interest in the construction project should consider builder’s risk insurance. This includes property owners, general contractors, and subcontractors. The policy can be purchased by either the property owner or the general contractor, depending on the terms of the construction contract².

Who Pays for Builder’s Risk Insurance?

The responsibility for paying for builder’s risk insurance typically falls on either the property owner or the general contractor. The decision is usually outlined in the construction contract. Here are some common scenarios:

1. Property Owner Pays: In some cases, the property owner may choose to purchase the builder’s risk insurance. This is often the case when the owner wants to have control over the insurance policy and ensure that it meets their specific requirements³.
2. General Contractor Pays: Alternatively, the general contractor may be responsible for purchasing the insurance. This is common when the contractor is managing the entire construction project and wants to ensure that all aspects of the project are adequately covered³.
3. Shared Responsibility: In some instances, the cost of the insurance may be shared between the property owner and the general contractor. This can be negotiated as part of the construction contract¹.

Key Considerations

When deciding who should pay for builder’s risk insurance, there are several factors to consider:

• Contract Terms: The construction contract should clearly outline who is responsible for purchasing the insurance. This helps avoid any confusion or disputes later on².
• Coverage Needs: Both parties should ensure that the policy provides adequate coverage for the project. This includes coverage for materials, equipment, and any potential delays or additional costs¹.
• Additional Insureds: It’s important to add all relevant parties, such as subcontractors and architects, to the policy as additional insureds. This ensures that everyone involved in the project is protected¹.

Conclusion

Builder’s risk insurance is a vital component of any construction project, providing essential coverage for buildings under construction. The responsibility for paying for this insurance can fall on either the property owner or the general contractor, depending on the terms of the construction contract. By clearly outlining the responsibilities in the contract and ensuring adequate coverage, all parties can protect their financial interests and ensure a successful construction project.

For more detailed information on builder’s risk insurance, you can visit Procore’s Guide to Builder’s Risk Insurance or Blue Rock Insurance Services.

¹: Procore ²: Blue Rock Insurance Services ³: Contractorhub

Feel free to ask if you need more details or have any specific questions!