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What is a Builder's Risk Insurance?

Builder’s risk insurance is an essential type of coverage for contractors, developers, and property owners undertaking construction projects in Montana. Whether it’s a new building or renovations to an existing structure, builder’s risk insurance provides coverage against a variety of risks that could potentially delay or derail a project. This guide explores everything you need to know about builder’s risk insurance in Montana, covering what it includes, why it’s essential, and how Montana-specific factors impact the policies available. 

What is Builder’s Risk Insurance? 

Builder’s risk insurance, sometimes called “course of construction” insurance, is a specialized type of property insurance that covers a building or structure during its construction. The policy covers the building materials, supplies, and equipment on-site and often extends to in-transit items and those temporarily stored off-site. Builder’s risk insurance is typically written for the length of a construction project and can be extended if the project timeline changes. 

Why is Builder’s Risk Insurance Important in Montana? 

Montana’s diverse climate presents unique challenges for construction projects. With extreme weather, ranging from freezing winters to hot, dry summers, and natural threats like wildfires and floods, builders in Montana face added risks. Builder’s risk insurance provides protection against these unpredictable hazards, ensuring that a project can recover financially from unforeseen delays and damages. 

What Does Builder’s Risk Insurance Cover? 

Builder’s risk policies are flexible and can be tailored to fit specific projects. Here are the standard coverages provided by most builder’s risk insurance policies: 

  1. Physical Damage to the Structure: Covers damage to the structure under construction due to events like fire, theft, vandalism, or certain weather events. 

  1. Materials and Equipment: Covers materials on-site and sometimes materials in transit or stored temporarily off-site. 

  1. Natural Disasters: Builder’s risk insurance can include coverage for windstorms, hail, or floods, though these may require additional endorsements. 

  1. Soft Costs: These include expenses such as architect fees, legal fees, and other administrative costs incurred due to project delays from covered losses. 

  1. Labor Costs: In case of covered events, the policy can cover the extra labor expenses necessary to meet deadlines. 

  1. Temporary Structures: Builder’s risk insurance often covers temporary structures such as scaffolding or fencing, essential for the safe completion of a project. 

Excluded Coverages: Builder’s risk policies typically exclude coverage for incidents like earthquakes, acts of war, employee theft, and machinery breakdown unless specific endorsements are added. In Montana, builders should discuss any potential exclusions with an insurance professional to determine if additional endorsements are necessary. 

Coverage Duration of Builder’s Risk Insurance 

Most builder’s risk policies last for the expected duration of a construction project. They are often renewable if delays occur, with the standard policy term ranging from 3 to 12 months. Once the building is completed and ownership is transferred or the structure becomes operational, builder’s risk insurance usually expires. After this, it’s generally advisable to switch to a standard commercial property insurance policy for continued coverage. 

Factors Affecting Builder’s Risk Insurance Premiums in Montana 

Several factors can influence the cost of builder’s risk insurance for Montana projects: 

  1. Project Value: Higher-value projects generally require higher premiums as there is more at stake in terms of coverage needs. 

  1. Project Duration: The longer the project duration, the higher the premium, as there is an increased exposure to potential risks. 

  1. Location and Weather Exposure: Montana’s variable weather patterns and risks, like high winds and wildfire-prone areas, impact premiums. 

  1. Construction Type: Wood-frame buildings generally have higher premiums than steel or concrete buildings due to the increased fire risk. 

  1. Coverage Limits and Deductibles: Policies with higher coverage limits and lower deductibles tend to have higher premiums. 

Special Considerations for Builder’s Risk Insurance in Montana 

  1. Wildfire Coverage: Given Montana’s susceptibility to wildfires, especially during dry summer months, builders may want to ensure that their policy includes coverage for fire damage and that any exclusions are addressed through endorsements. 

  1. Winter Weather: Montana winters can cause delays or damage from snow and ice. Policies can be tailored to include protection against winter-related risks, including water damage from freezing pipes. 

  1. Flood Coverage: While flood damage is generally excluded from builder’s risk policies, certain areas in Montana may need flood insurance due to seasonal flooding in valleys and low-lying areas. Builders should consider this coverage if the construction site is near a flood-prone area. 

Who Needs Builder’s Risk Insurance? 

Builder’s risk insurance is typically purchased by the party with a financial interest in the project. This may include: 

  • General Contractors: They often carry builder’s risk insurance to cover their investment in labor and materials. 

  • Project Owners: Property owners may purchase builder’s risk insurance to protect their assets and ensure a smooth project completion. 

  • Subcontractors: While usually covered by the contractor’s policy, some subcontractors may require coverage for their specific materials or equipment on-site. 

In Montana, builder’s risk policies can be adapted to meet the needs of residential, commercial, and public works projects. Builders can also list multiple insured parties to protect all stakeholders involved. 

Working with Montana Insurance Brokers 

Navigating builder’s risk insurance policies can be challenging due to the various coverage options and endorsements available. At Montana Insurance Brokers, we specialize in understanding the unique needs of Montana-based construction projects. Our agents work closely with contractors, developers, and property owners to assess risk factors, understand the local regulatory landscape, and select a policy that ensures comprehensive protection.

Reach out to us at info@mtinsurancebrokers.com or on 406 401 7220. 

-Klinton Jones 
Licensed Insurance Broker