What builders risk covers
Builders risk is property insurance for a project under construction. It typically covers the building as it is built, materials on site (and often in transit or stored off site), and temporary structures, against causes such as fire, wind, theft and vandalism. The limit is usually based on the completed value of the project. Policies can add soft costs, such as interest and fees that keep running when a covered loss delays completion.
Lenders set their own requirements. Fannie Mae's multifamily guide, for example, asks for builder's risk equal to at least 100% of completed value during construction work, with soft costs included (source: Fannie Mae Multifamily Guide, Part II, Ch. 5).
Liability on NYC construction projects
Builders risk does not cover injuries. Liability on a construction site is handled by the contractors' general liability and the owner's own liability policy. NYC's Department of Buildings requires contractors pulling permits for construction or demolition to show general liability insurance, and many projects also need project-specific general liability under 1 RCNY §101-08. DOB lists exemptions, for example certain small one- and two-family projects.
Renovating an occupied building?
If tenants stay in the building during the work, the existing property policy and the renovation coverage have to fit together. Tell us early so the policies don't overlap or leave a gap. When a project stalls and the building is empty, see vacant building insurance.
Frequently asked questions
Who buys builders risk, the owner or the contractor?
Either one, depending on the construction contract. On many NYC projects the owner buys it so the coverage and claims stay in the owner's control. The contract should say who buys it and who is insured under it.
Does builders risk cover a gut renovation?
It can. Renovation builders risk covers the work being done, and the existing structure can often be included. Some insurers prefer to keep the existing building on a separate property policy.
When does builders risk end?
Usually at completion or when the building is occupied or put into use, whichever comes first. Then the building moves to a permanent property policy. Plan that switch ahead of time.