Written by GWS Insurance
Q: What is builders risk insurance?
A: It is temporary property insurance for a building or renovation project while work is underway. Depending on the policy, it can address the structure, materials and other project exposures during construction. It is not a substitute for liability insurance, workers compensation or the permanent property policy that protects the completed building.
Q: Isn't my apartment building's regular property policy enough?
A: Sometimes it may be, especially for minor work. But many property policies exclude or limit coverage during construction, renovation or restoration. Do not assume the existing policy follows the project. Fannie Mae's multifamily guide calls for builders risk coverage when property insurance is excluded or otherwise limited during property construction, renovation or restoration. That is a lender requirement for loans under that guide, and it is a useful warning for any owner planning work.
Q: When should builders risk coverage start and end?
A: Before the exposure starts, not after the contractor arrives. Fannie Mae's guide defines the start of construction activity as the earlier of physical work beginning or materials intended for the project being delivered, whether those materials are onsite or offsite. It defines completion as the later of substantial completion or issuance of required certificates of occupancy, licenses or permits. Your own policy and loan documents may use different wording, so line up the dates before work begins.
Q: How much builders risk coverage should an owner review?
A: Start with the completed value of the project, not just the amount already spent. Fannie Mae's current guide looks for at least the completed value, including project contracts and materials, plus applicable soft costs. Its examples of soft costs include interest during construction, taxes, architect and engineering fees, and other overhead attributable to delay. The right amount for your project depends on its contracts, budget, policy terms and lender requirements.
Q: Does builders risk cover injuries on the job?
A: Usually no. Builders risk is primarily property coverage. General liability, workers compensation, contractor liability and umbrella coverage are separate questions. Review who is responsible for each coverage under the construction contract, whether the owner needs to be added to the contractor's liability policy, and what the lender requires.
Q: What if tenants remain in the building during the work?
A: Treat that as a separate review. An occupied renovation can raise questions about habitability claims, dust and water damage, temporary repairs, security and displaced tenants. Builders risk also does not automatically replace lost rent if units must come offline. Review vacancy wording, loss-of-rents coverage and any notice requirements before work starts.
Q: What should I check before signing the contract or scheduling work?
A: Ask whether your current property policy limits construction, renovation or restoration. Get the lender's written insurance requirements if the building is financed. Confirm the named insured, project address, policy period, coverage for materials onsite and offsite, soft-cost treatment, deductible, wind and flood terms, and what happens if the project is delayed. Make sure the permanent property policy is ready to take over without a gap when the project is complete.
This article is general information, not legal or policy advice. Builders risk and property coverage depend on the specific policy, endorsements, exclusions, limits, deductibles, project contracts, loan documents and claim facts. Review your own documents with a licensed insurance professional.
Planning a renovation at a South Florida apartment building? GWS Insurance can review your property policy, builders risk needs and lender requirements before work begins. Call (516) 476-6742 or visit https://www.gwsinsurance.com/contact.