Builder’s risk insurance also known as (Contractor’s All Risk insurance /CAR insurance) is a special type of property insurance which indemnifies against damage to buildings while they are under construction. Builder’s risk insurance is “coverage that protects a person’s or organization’s insurable” interest in materials, fixtures and/or equipment being used in the construction or renovation of a building or structure should those items sustain physical loss or damage from a covered cause.
Builder’s risk covers perils such as fire, wind, theft, vandalism and many more. It typically does not cover perils such as earthquake, flood, or hurricane damage unless the policy has been specifically endorsed to do so. However, earthquake riders can be very economical, depending on where your project is located and should be considered. These policies also do not cover accidents and injuries at the workplace. and is intended to terminate when the work has been completed and the property is ready for use or occupancy. If you are going to properly set up your policy, coverage should be effective prior to when the materials are delivered to the job site.
Coverage ends upon the earlier closing of the sale, occupancy, or the policy expiration date. After builder risk coverage expires, due to sale or occupancy, the new owner should take out permanent property insurance on the building such as a homeowner’s policy or a commercial property policy.
Insurance costs generally run between one and four percent of the construction cost, depending upon the type of insurance purchased and exclusions from coverage.