Builder's risk

How does builder's risk insurance work for a trucking and logistics business?

A building under construction is not like a finished one. It has no walls to stop weather, no alarm, and materials stacked on site that have been paid for but not yet installed. A fire, a storm, or a theft during the build can set a project back by months, and your loan or contract does not pause while it does.

Builder's risk is the policy written for that period. The NAIC describes builders' risk policies as typically written on a reporting or completed value form, insuring against loss to buildings in the course of construction. In general, it covers the structure being built and the materials and fixtures that will become part of it, up to the limit on the policy, for covered causes of loss.

Projects where it comes up for operators in this industry:

• Building a new terminal, or adding a dock or an office wing to an existing one
• Adding service bays to a repair shop or maintenance building
• Putting up a storage building, parts room, or truck wash on a yard
• Building out a rented space to fit a shop, with the landlord's permission
• Rebuilding after a fire or storm, where a contractor does the work

Who carries it. It is often carried by the property owner or the general contractor. The construction contract decides who is responsible, and a lender on the project may require it. Do not assume your contractor carries builder's risk on your project, and do not assume yours covers the contractor's tools and equipment. Ask for the answer in writing.

When it starts and ends. Coverage generally begins when construction begins and ends when the project is complete or occupied, as the policy defines it. The wording of the end date matters. A gap between the end of builder's risk and the start of commercial property is where owners get hurt, so plan the hand-off before the work starts.

What does builder's risk cover, and what doesn't it?

Policies vary. Read your declarations, definitions, and exclusions. In general:

Often covered

• The structure under construction, from covered causes such as fire, wind, hail, and vandalism, depending on the causes of loss the policy includes
• Materials and fixtures at the site that are to become part of the building, under many policies
• Materials in transit to the site or stored off site, under some policies, up to a stated limit
• Temporary structures and some construction equipment, if listed or described, under some policies
• Delay in completion costs or soft costs, such as extra interest or lost rent, under some policies or added coverages

Often not covered, or covered only with conditions

• Faulty workmanship and defective design. Commonly excluded, though resulting damage may be treated differently.
• Wear and tear, and gradual deterioration
• Theft of unsecured materials or equipment. Often limited by security conditions.
• Flood and earthquake. Commonly excluded unless added or bought separately.
• An existing building you keep using. In a renovation, ask how builder's risk and your property policy divide the existing structure, the new work, and any contents.
• Equipment being installed in the finished building. Ask whether that falls under builder's risk, an installation floater, or inland marine.
• Contractors' tools and equipment. Usually the contractor's own coverage.
• Liability to other people. If someone is hurt on the site or a neighbor's property is damaged, that is general liability, and the contractor's own liability coverage is the place to start.
• Injuries to workers. That is workers' compensation, carried by each employer.
• Your trucks, trailers, and freight. Those are physical damage and motor truck cargo. A truck parked at the build site is not part of the building.

These are common patterns, not universal ones. A single exclusion or condition can decide a claim, so read yours before work begins.

Who covers what before, during, and after a build?

A shop or terminal project crosses several coverages over its life. This table shows the usual pattern. Your contract, your lease, your lender, and your policies decide the actual answer.

An example (hypothetical). A small fleet leases a yard and a shop. The owner of the building agrees to let the fleet add two service bays, and the fleet hires a contractor. The questions to settle before the work starts: Is the landlord or the fleet responsible for builder's risk? Does the lease require it? What does the contractor carry? When does builder's risk end, and who covers the finished bays after that? The fleet's commercial property policy, the landlord's insurance, and the contractor's coverage may each answer part of those questions, and none should be assumed.

What affects the cost of builder's risk insurance?

We don't publish prices. Cost is set by insurers and the licensed agents you work with, not by BreadRoute. These are the factors that generally move it:

• Value of the project. The hard costs of construction, and materials stored on site or in transit
• Type of construction. Steel, masonry, wood frame, or a mix
• New build versus renovation. And whether an existing building stays in use
• Project length. How long construction is expected to take
• Location. Weather, fire response, and crime where the site is
• Site protection. Fencing, lighting, security, and fire protection during the build
• Contractor experience. Track record and how the work is managed
• Deductible and causes of loss. Including flood, earthquake, and wind
• Soft cost coverage. Delay in completion or extra expenses, if included
• Lender or contract requirements