Builder's risk
The property policy built specifically for a project still under construction, not yet insured as a finished building.
Builder's risk insurance is a property policy designed to cover property while it is under construction, installation, alteration, or repair. It fills the gap when a building is mid project and not yet in the finished condition your regular master policy is built to insure. Ask your broker whether a specific project needs its own builder's risk policy before work starts.
What builder's risk actually covers
Your association's master policy is written around the building as it normally stands. Builder's risk is different: it is written around a building site, a structure partway through a job, where materials, unfinished work, and sometimes the existing building itself are all exposed at once.
"A property insurance policy that is designed to cover property in the course of construction."
Source: IRMI Glossary of Insurance and Risk Management Terms, International Risk Management Institute
That short definition covers a lot of ground: a new clubhouse being built from the ground up, a roof being torn off and replaced, a lobby gutted down to the studs. In each case, the property is not in a stable, finished state, and that is exactly the condition builder's risk is built to insure.
When a project needs its own policy
Ground-up construction, a major renovation, or rebuilding after a large loss are the kinds of projects where builder's risk typically comes up. Whether your specific project needs a standalone policy, and who is required to buy it, varies by the size of the job, your construction contract, and any lender involved. Check the contract before it is signed, not after.
Do not assume your existing master policy quietly extends to cover a project like this. Ask your broker directly, and get the answer in writing before the contractor breaks ground.
What this Course does not settle for you
Exactly how builder's risk interacts with your existing property policy, and whether an already-completed part of the building is automatically excluded from it, depends on the specific policy and how it is written. Do not assume either answer. Bring your broker the actual scope of the project and ask them to walk through, in writing, where your master policy's coverage stops and where builder's risk needs to pick it up.
Check yourself
Answer before you read the explanation, recalling it is what makes it stick.
Your association is tearing off and rebuilding a clubhouse roof after storm damage, and the job will run six months. Which policy is built specifically to cover the building while this work is underway?
A board is planning a full rebuild of a common area building lost to fire. Before signing the construction contract, what should the board ask its broker to confirm?
Nobody bought a separate builder's risk policy for a gut renovation of the lobby. Mid project, a pipe bursts and floods the unfinished space. What is the likely problem?
Sources
- IRMI Glossary of Insurance and Risk Management Terms, International Risk Management Institute
Insurance
Next: see how property insurance covers your buildings once construction is finished.
Whether your project needs its own builder's risk policy, who is required to buy it, and exactly how it interacts with your existing master policy depend on your contract, your lender, and your carrier's specific policy language.