Builders risk vs. general liability: A contractor's guide to essential construction insurance
Every successful construction project depends on careful planning, coordination, and timing. Before work begins, you're already managing design specs, subcontractors, materials, and schedules. From the start, the right insurance plays an important role in supporting both the structure you're building and your business operations.
Whether you're breaking new ground or renovating a building, you should consider two types of protection: builders risk and general liability. Builders risk insurance focuses on the structure and materials while construction is underway. General liability insurance can help address third-party injury and property damage claims related to your work.
What is builders risk insurance?
Builders risk is a temporary form of property insurance that helps protect buildings, structures, and materials from day one of construction through the final touches. Coverage typically begins when work starts and ends once it's complete. Think of it as a giant hard hat protecting your project from unexpected damage while work is underway.
What does builders risk insurance cover?
Builders risk insurance protects property under construction from fire, vandalism, and other risks. Coverage typically includes:
- Building foundations and framing
- Temporary structures, like scaffolding
- Building materials and supplies
- Permanent equipment and fixtures, such as HVAC, plumbing, and sprinklers
Extending builders risk coverage for additional materials
You may be able to extend builders risk coverage to include materials owned by others. This can apply when they're in your care, custody, and control during construction and will be permanently installed in the building. You can also cover landscaping, such as trees, plants, and sod. Speak to a Progressive Commercial specialist for more details.
Who needs builders risk insurance?
If you have a financial stake in a construction project, builders risk insurance can help protect your investment. Those who can benefit from this coverage include:
- General contractors
- Property owner-builders
- Developers
- Investors
- Subcontractors
- Lenders
What is general liability insurance?
General liability insurance can protect businesses from a variety of third-party claims. These claims may involve bodily injury, property damage, or certain personal or advertising injuries tied to your business activities.
If builders risk is a hard hat that protects individual projects, general liability is the safety net that supports your entire business. It applies more broadly to your day-to-day work.
What does general liability insurance cover?
General liability insurance coverage may help cover claims related to:
- Bodily injury: Medical expenses, legal fees, and settlements if someone is injured due to your business operations, such as a visitor slipping at a job site.
- Property damage: Damage to someone else's property, like accidentally breaking a client's window during a renovation.
- Personal and advertising injury: Libel, slander, copyright infringement, or false advertising, such as a competitor alleging trademark infringement.
- Products-completed operations: Claims that arise after a project is complete, like a deck you built three months ago collapsing.
- Legal defense costs: Attorney fees, court costs, and settlements or judgments up to your policy limits.
Who needs general liability insurance?
Nearly every company involved in the construction industry should carry liability insurance for builders. It's often the first policy contractors purchase and is frequently required to win contracts or secure licensing. Here are some professions and trades who benefit most from this coverage:
Key differences between builders risk insurance vs. general liability
Builders risk and general liability insurance serve different purposes during construction and renovation projects. The main differences include:
|
Builders risk insurance |
General liability insurance |
|
|---|---|---|
| Coverage Focus | Buildings, materials, and fixtures while a project is being built or renovated | Injuries to others and damage to their property caused by your business |
| Policy duration | Short-term coverage that lasts from the start of construction until the project is complete | Ongoing coverage while the business is operating and the policy is active |
| Who it protects | Property owners and contractors for construction-related property losses | Business owners and employees for third-party liability claims |
How builders risk and general liability work in the real world
Understanding how builders risk and liability insurance apply in different situations can help clarify their roles on construction and renovation projects. Let's look at some examples of how these coverages respond to common scenarios.
How builders risk insurance works
Here are some situations where builders risk may apply during construction:
- Fire damage: Framing is underway on a new home when a fire causes damage.Builders risk insurance may pay to repair or replace the damaged materials and structural components.
- Vandalism: Vandals break into the job site and damage installed fixtures. Builders risk could help repair permanent fixtures, such as HVAC or plumbing.
- Windstorm: A windstorm destroys materials stored on-site. Builders risk coverage may apply if the materials were intended for permanent installation and stored within 100 feet of the job site.
How general liability insurance works
Here's how general liability insurance can help your business with third-party claims when something goes wrong:
- Bodily injury: A delivery driver slips and falls on construction equipment.General liability insurance could cover their medical treatment and related legal expenses.
- Property damage: A customer claims your crew caused damage during a home renovation. General liability covers the cost to repair or replace the damaged property and any court expenses.
- Advertising injury: A supplier files a lawsuit saying your business made false statements about their materials. General liability insurance can help your business respond to these claims in a settlement or in court.
Common misconceptions about insurance coverage
Misunderstandings about builders risk insurance and liability insurance can lead to gaps in protection. Here are common misconceptions:
Misconceptions
- General liability covers all construction risks.
- Builders risk insurance covers everything on the job site.
- Faulty workmanship is covered by general liability.
VS.
Reality
- It doesn't cover damage to the structure being built or materials in your care, custody, and control.
- It only covers property and fixtures meant for permanent installation. To protect movable assets like excavators, cranes, and hand tools, you'll need tools and equipment insurance.
- General liability excludes installation mistakes and faulty work.
Get complete coverage through Progressive Commercial
Carrying both builders risk and general liability insurance can help reduce coverage gaps during construction projects. At Progressive Commercial, we'll help you build a plan that's right for you. Call us or start a customized quote online today.
Frequently asked questions about builders risk insurance
Do I need both builders risk and general liability insurance for a construction project?
You should consider it. Many construction projects involve both types of coverage. Builders risk insurance protects the project, and general liability addresses a variety of third-party claims related to your business operations.
Does builders risk insurance cover contract breaches or project delays?
No. Builders risk insurance doesn't cover contract disputes, project delays, or mismanagement. Professional liability insurance may be able to help with these claims.
Do I need builders risk insurance as an owner-builder?
Yes, probably. If you own the building under construction, lenders might require you to carry a type of builders risk called owner-builder construction insurance.
Is builders risk insurance for renovations necessary?
It depends on the project. Large renovations often need the added protection of builders risk insurance. Standard property coverage, whether homeowners or commercial, often has gaps or exclusions that leave renovation projects exposed.
Smaller residential remodels may not need builders risk coverage but check your policy to be sure.
Can I use builders risk insurance after my project is finished?
That depends. Builders risk coverage typically ends 90 days after construction is complete or 60 days after the building is occupied or in use. Other factors include policy expiration or cancellation, project abandonment, or acceptance of the property by a buyer.
For ongoing protection, consider commercial property insurance on a business owners policy (BOP).
