The Solution for Association Insurance

Project Insurance (Builders Risk)

Builders Risk Insurance is a specialized form of property coverage designed to protect condominium and community association projects during renovation, rehabilitation, or new construction. When a building undergoes significant improvements, the association’s primary property insurance policy may not extend coverage to the unique risks associated with construction activities. Builders risk insurance fills this critical gap, safeguarding the financial interests of the association, unit owners, and other stakeholders throughout the duration of the project.

This coverage is essential for protecting materials, structures, and project-related exposures from unforeseen events that can occur during construction. Without it, associations may face substantial out-of-pocket expenses if damage occurs before the project is completed and accepted.

Why Builders Risk Insurance Is Important for Community Associations

Renovation and construction projects introduce a variety of risks that are not typically contemplated under a standard master property policy. Activities such as structural modifications, material storage, and contractor operations can significantly increase the likelihood of losses. Builders risk insurance ensures that these exposures are properly addressed, helping to prevent financial strain on the association and its members.

In addition to protecting the physical improvements, this policy can be structured to include contractors, subcontractors, lenders, and other project participants as additional insureds or named insureds. This coordinated approach to coverage promotes clarity of responsibility and reduces the potential for disputes in the event of a claim.

What Does Builders Risk Insurance Typically Cover?

Builders risk policies are designed to provide broad protection for property involved in the construction or renovation process. Coverage can be tailored to meet the specific needs of the project and may include:

• Damage to the building or structure under renovation or construction
• Materials, supplies, and equipment stored on-site or in transit
• Temporary structures such as scaffolding and construction forms
• Fire, wind, theft, vandalism, and certain weather-related events
• Soft costs resulting from covered losses, such as architectural fees, permits, and additional interest on loans
• Debris removal and cleanup expenses

Because coverage can vary based on the insurer and project scope, it is important for associations to work closely with an insurance professional to ensure that all relevant exposures are addressed.

When Is Builders Risk Insurance Needed?

Builders risk insurance should be considered whenever a condominium or homeowners association undertakes significant construction or renovation activities. Common scenarios include:

• Major building renovations or rehabilitations
• Roof replacements or structural upgrades
• Additions or expansions to existing buildings
• Reconstruction following a loss
• Installation of significant mechanical, electrical, or plumbing systems
• New construction within an existing community

Securing coverage before construction begins is essential to avoid gaps in protection and to meet contractual or lender requirements.

Key Considerations for Associations

When arranging builders risk insurance, associations should evaluate several important factors to ensure comprehensive protection:

• Project Scope and Value: Coverage limits should reflect the full completed value of the project, including labor and materials.
• Policy Term: The policy should remain in effect for the entire construction period, including any potential delays.
• Soft Costs Coverage: Consider including coverage for additional expenses incurred due to project delays following a covered loss.
• Additional Insureds: Contractors, subcontractors, and lenders may need to be included to align with contractual obligations.
• Coordination with the Master Policy: Ensuring seamless integration with the association’s existing insurance program helps prevent coverage gaps or overlaps.

Supporting Risk Management and Financial Stability

Builders risk insurance not only protects the physical project but also supports the long-term financial stability of the community. By mitigating the financial impact of unexpected events, associations can proceed with improvements confidently while safeguarding reserve funds and minimizing the likelihood of special assessments.

Proper planning and coordination with experienced insurance professionals ensure that the policy aligns with the association’s governing documents, contractual requirements, and overall risk management strategy.