Builder’s risk insurance is a very specialized type of insurance that covers very specific items for a controlled period of time. As always with insurance, you should ask around and find out all the options and costs required for your policy before you rush into buying something that provides either more or less coverage than you actually need.
Builder’s risk insurance is something that the owner of the building under construction typically purchases to cover damage to that building only while it is actively being built. This type of policy protects the owner from extreme costs should anything happen. Normally, the builder himself does not buy this insurance, but might have his own policy to cover his tools and any of his employees. Also, subcontractors have their own insurance.
Typically, builder’s risk insurance covers the following: Vandalism, explosions, a vehicle running into the building, wind damage, lightning, hail, fire, and theft.
You may notice that this list covers many things that can go wrong on a construction site, but certainly not all things. Usual exclusions for a policy like this include: Weather damage to property away from the building, water damage, earthquake, employee theft, and (believe it or not) war.
Policies usually are sold for a set amount of time, ie, 3 months, 6 months, or 12 months and the policy become inactive once construction has finished. If the time runs out under the policy’s coverage, most agents will sell you a one-time extension to allow construction to continue and be completed.