To understand builders risk coverage, you need to understand inland marine.
Originally sold by ocean marine insurers, inland marine insurance covers property transported on land (hence, inland marine). Over the years, the term inland marine has come to describe several specialty coverages related to transit and shipping products by land.
In construction, inland marine insurance protects a contractor’s tools, equipment and materials in transitor on a job site. Some business owners policies provide limited inland marine coverage, but additional insurance may be needed for high-value items. Know that basic property insurance only protects the items at the location named in the policy, so items carried to a job might not be covered.
Inland marine isn’t limited to construction. Virtually anything shipped over land can be covered. Computer, communications and networking equipment; medical and scientific equipment; photography equipment; and trade show and art exhibits are all examples of property insured by inland marine.
Builders risk is a type of inland marine insurance
Builders risk is a form of inland marine insurance that protects construction projects in progress. It insures against property losses and covers materials, supplies and equipment on-site or in transit. Coverage continues until the project is complete. Both commercial and residential construction can becovered.
There are various types of builders risk (“course of construction”) policies. Renovators might purchase acommercial remodelers policy to cover a renovation, for example. Trade contractors such as plumbers, electricians and carpenters might secure an installation floater policy to cover property they install on-site.
Policies cover losses on an “all-perils” basis. So you'll be covered for hurricanes, earthquakes, lightning, fires, explosions, sewer backups and theft. Coverage is also available for business interruption or loss of rent resulting from a delay. This is typically referred to as "time-element" or "rental-value" coverage.
Builders risk insurance often covers “soft costs” if a project falls behind. Soft costs include additional interest on the project’s financing, real estate taxes, advertising expenses, insurance, architect fees, extended general conditions, bond and permit fees, legal and accounting expenses, and other administrative costs.
Builders risk is different from first-party property insurance in that there can be multiple parties named on a policy. Essentially, anyone who has a financial risk in the project can be named. Primary insured partiesare typically developers and owners, general contractors, subcontractors and lenders. Architects and engineers may also be named.
Talk to your insurance broker
Once you understand that inland marine and builders risk are different types of insurance with the same origin, it’s easy to see how builders risk might cover your business or project. There are no standard forms,so talk to an insurance broker about your needs and the various policies available.
This content is for informational purposes only and not for the purpose of providing, financial, medical or legal advice. You should contact your attorney, doctor, broker or advisor to obtain advice with respect to any particular issue or problem.
