Commercial Insurance Solutions

What is Builder's Risk Insurance?

Builder's risk insurance is a type of construction risk insurance. It protects your investment in buildings and other structures while they're under construction. In Miami and in South Florida, this type of insurance indemnifies your business against losses due to fire, vandalism, lightning, wind, and similar forces. Protection from damage due to earthquake, flood, acts of war, and terrorist acts can usually be added on to the policy for a higher premium.

​

Construction risk insurance is usually bought by the owner of the building or property. It shouldn't be confused with contractor's risk insurance. In South Florida, contractor's risk insurance is purchased by the general building contractor to protect themselves against losses or damage to the structure through accident or negligence, and to insure the value of their tools and materials on the construction site. Contractors may also be required to purchase builder's risk insurance if the legal contract requires it.

​

In Miami and in South Florida in general, a construction risk insurance policy pays for any and all damages up to the limit of coverage purchased. The limit on these polices should accurately reflect the total value of the structure once completed, including all labor and materials, but excluding land value. Builder's risk insurance is a type of term insurance, purchased to protect the owner's investment for a limited period of time. If construction is still underway when the policy expires, it may be eligible for a one-time renewal.

​

Why You Need Builder's Risk Insurance

You may not be eligible for bank financing unless you or your contractor can provide proof of construction risk insurance and possibly contractor's risk insurance. In South Florida, buildings are subject to many different risks while under construction. Hurricanes wreak havoc on construction sites through high winds, tornadoes, and torrential rains.

 

The construction site may catch fire or fall victim to other force majeure. A builder's risk insurance policy protects you from the losses associated with these kinds of catastrophes and will allow you to continue clean up and construction on the site after the accident or catastrophe is over.

​

Keep in mind that a general contractor may be responsible for any losses caused by his own negligence, but the owner is responsible for most other losses associated with the new construction. Builder's risk insurance can indemnify you, the building owner, against these losses.

​

Considering that the level of coverage needed on even the most modest construction projects may exceed a million dollars, a construction risk insurance policy should be written by an insurance broker with experience in construction insurance. In our Miami office, AIB will work on your behalf to source the best policy for this specialized type of coverage. Our brokers know how to estimate the costs of materials and labor for your construction project, and how to gauge the worth of the completed structure.

If you're considering a new construction project for your business, contact us at AIB today. Any of the agents in our South Florida offices will be happy to assist you in getting the builder's risk insurance you need.