Business & Finance

Builder’s Risk Insurance vs Property Insurance: What You Need and When

You, as a property owner are responsible to insure your property against all risks. However, what happens when your property is in danger? What happens if you’re in the middle of a construction project?

What exactly is Builders risk insurance?

It is simple. builder’s risk insurance. The type of property insurance called “Builder’s risk” covers the property for damage during the building process. This insurance can cover a variety of risk factors, such as fire, theft, vandalism and weather-related damage.

There are a few things that make Builder’s Risk Insurance different than traditional property insurance.

  • The first is that it covers a property in the middle of construction, and not afterwards.
  • It is typically shorter than traditional property insurance and lasts only for as long as the construction project.
  • Finally, builders’ risk insurance usually has a higher deductible than property insurance.

Are You a Builder?

When a property is being built, lenders will usually require builder’s insurance. Even if your loan does not include construction financing, builders may still require builder’s insurance for any major renovation or addition.

What exactly is Property Insurance?

Insurance that protects a home from damage is called property insurance. This insurance can cover a variety of risk factors, such as fire, theft or vandalism and even weather damage.

In a few ways, property insurance differs from builder risk insurance.

  • The first is that it covers a property when the construction phase has ended.
  • It is also more durable than builders’ risk insurance and can be used for as long as the property remains in existence.
  • Finally, property and builder risk insurance have a higher deductible.

Why do you need property insurance?

Lenders usually require property insurance when financing a home with a mortgage. If you are doing major renovations to or adding on to your property, even though you don’t use financing for it, property insurance may still be required.

Which one is right for you?

Knowing the differences between building risk and property insurance will help you make an educated decision on which type of insurance you need.