Builder’s Risk Insurance: The Good and The Bad

Builder’s risk insurance is a must-have for anyone involved in new construction or major renovations—whether you’re a general contractor, developer, or real estate investor. Here’s a quick look at the pros and cons to help you decide if it’s the right fit for your project.

The Good

• Protects Your Investment: Covers buildings and structures under construction against damage from fire, wind, theft, vandalism, and certain natural disasters.

• Customizable Coverage: Policies can be tailored to include materials, equipment, temporary structures, and even soft costs like lost income or additional interest.

• Meets Lender & Permit Requirements: Often required by lenders and municipalities for construction loans and project approvals.

• Peace of Mind: Reduces the financial risk of unexpected setbacks, so you can focus on project completion.

• Supports Project Continuity: Quick claims processing helps keep your timeline on track after a covered loss.
  

The Bad

• Limited to Construction Period: Coverage typically ends when construction is complete or the property is occupied—no protection after that without a permanent policy.

• Not All Risks Covered: Common exclusions include faulty workmanship, design errors, employee theft, and normal wear and tear.

• Complex Policy Terms: Understanding what’s covered (and what’s not) can be challenging—endorsements for water damage or flood may be needed in Texas.

• Potential Gaps: If the policy isn’t set up correctly, you could face gaps in coverage—especially for subcontractors or materials in transit.

• Cost Considerations: Premiums vary based on project size, location, and scope, and can add up quickly on large developments.
  

Bottom Line

Builder’s risk insurance is essential for protecting your construction investment, but it’s not a one-size-fits-all solution. Work with an independent agency (like MAKZ Insurance) to review options, identify potential gaps, and ensure your project is covered from groundbreaking to completion.

Questions? Reach out to us at MAKZ Insurance Agency for expert advice and tailored solutions for your next build.