AEC definitions
Builder's risk insurance covers physical loss to the work under construction, from causes the policy lists, such as fire, wind, or theft of installed materials. The contract says who buys it. It is not liability insurance, and it is not a performance bond.
Definition
The policy insures the property interest in the project while it is being built: materials, the structure in place, and sometimes temporary structures. Exclusions are the part to read. Flood, earthquake, faulty workmanship, and contractor's tools are often excluded or limited. Soft costs, such as extended interest and delay expense after a covered loss, are covered only if the policy says so. The general conditions name the insureds, the limit, the deductible, and who pays the deductible. A loss that is poor workmanship is a contract problem. A loss that is a fire is an insurance problem. They can occur together.
In depth
A named-perils or an all-risk form still has exclusions. Ask whether wind, water, testing and startup, and materials in transit or stored off site are included. Off-site fabrication is a frequent gap.
The limit should track the contract value as it grows. A policy bound at the early GMP and never increased is underinsured.
If a wall is built out of plumb, the correction is the contractor's obligation. If a fire destroys a wall that was built correctly, the policy responds, subject to the deductible and exclusions. If defective work causes a covered peril that damages other work, the resulting damage may be covered when the defect itself is not. The policy wording decides.
Do not report every punch item to the carrier. Do report a loss promptly when a peril is involved.
The contract often requires the policy to name owner, contractor, and subcontractors as insureds, and to waive subrogation among them, so the insurer does not sue a project party for a covered loss. A policy that misses those endorsements has not met the contract.
The party who buys the policy is not the only party who needs a certificate. The general conditions say who must receive proof.
A large deductible assigned to 'the party at fault' recreates the fight the waiver of subrogation was meant to avoid. Assign it in the contract: owner, contractor, or the party whose work was damaged, in a sentence.
Small losses below the deductible are a contract cost, not a reason to skip notice if the policy requires notice anyway.
Occupancy, substantial completion, or a calendar date can end the policy. Early move-in without telling the carrier can void coverage.
Permanent property insurance should start as builder's risk ends, with no gap.
Examples
A fire damages two floors. The builder's risk policy responds to the physical loss. The deductible is paid as the general conditions require.
A curtain wall is fabricated incorrectly. The rebuild is a warranty correction, not a builder's risk claim.
Stored panels at an off-site warehouse are confirmed as covered, or they are moved, before a storm season.
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