What Does Builder’s Risk Insurance Cover in New Jersey?

Construction projects are inherently risky, but when it comes to unfinished buildings and insurance coverage, things get really dicey. Since standard property insurance policies aren’t built to cover construction sites in progress, a special type of coverage known as builder’s risk insurance is necessary to get the job done. For general contractors, other construction teams, and property owners in New Jersey, it’s important to learn all about builder’s risk coverage.

What Is Builder’s Risk Insurance?

Regardless of where a construction project takes place, builder’s risk insurance is basically an agreement between a construction project manager, property owner, or general contractor and the insurance company in which the insurer agrees to cover financial losses relating to the construction project. Coverage aims to replace or recover the value of the construction project as it progresses, and covers things like labor costs and property damage.

Of course, each builder’s risk insurance policy in New Jersey comes with its own list of specifically covered perils in which the insurance company will reimburse for losses. Since regular property insurance policies have deficiencies when it comes to buildings still in progress, builder’s risk insurance is set up to provide coverage for a construction project’s current value which continually increases as the project inches towards completion.

What Does Builder’s Risk Insurance Cover in New Jersey?

Builder’s risk insurance is set up to protect general contractors or property owners against potential threats to the construction project. This goes for construction sites anywhere in the country including New Jersey. One of the biggest pros to builder’s risk policies is that they protect against big “oops” factors like the accidental destruction of a construction project if an employee mistakenly smashes the entire building or burns it down, for example.

The more risks involved and the larger the scale of your project, the more coverage you’ll need. That being said, builder’s risk policies come with three common coverage options.

There are three main types of builder’s risk policies available in New Jersey:

• Basic coverage: This type of coverage protects against the most major of potential threats like fire, lightning, wind, explosions, and more.
• Broad coverage: This type of coverage includes all the perils of a basic policy, and also adds protection against things like falling objects, water damage, and more.
• Special coverage: This type of coverage includes all of the above, and also tosses in protection for things like theft and vandalism, the two biggest threats to construction sites and exposed materials. Coverage also includes several other perils, and protects against basically anything not listed under the builder’s risk policy’s set of exclusions.

One thing to note about builder’s risk insurance policies in New Jersey is that they’re nonstandard, which means policies aren’t the same across the board. Depending on the specific insurance company you choose, your policy may have some slight differences in coverage. Working closely with a New Jersey independent insurance agent is the best way to get set up with a builder’s risk policy that works for your needs.

What Does Builder’s Risk Insurance Not Cover in New Jersey?

Though builder’s risk insurance covers a lot of components for construction projects and their supervisors, unfortunately it can’t cover everything. Exclusions for this type of coverage are quite similar to exclusions in many other forms of standard property insurance. The following are examples of commonly excluded perils under many builder’s risk insurance policies in New Jersey:

• Employee dishonesty
• General wear and tear of equipment, etc.
• Loss/destruction of most equipment/tools
• Routine maintenance fees
• Earthquake damage
• Nuclear reaction and war
• Power failure (unless it causes damage to computer systems)
• Robbery
• Pollution
• Temperature/humidity changes
• Inexplicably lost inventory
• Flood damage*

*In a state like New Jersey that’s prone to flooding, you’ll most likely want to purchase additional flood coverage to tack onto your builder’s risk policy. Your New Jersey independent insurance agent can give you more information about finding the right flood coverage for your projects.

Another category not covered under many builder’s risk policies in New Jersey is what’s known as “soft costs,” or things that cost the general contractor, etc., more money because there was a loss during the project. For example, if a project gets prolonged due to an error and the contractor has to extend a line of credit, or if a building owner has to find new tenants if someone breaks a lease, special endorsements to cover soft costs can be added to your policy.

What Are the Benefits of Builder’s Risk Insurance in New Jersey?

Builder’s risk insurance offers benefits beyond just reimbursing property owners or general contractors for physical damage to construction projects. There are a handful of reasons builder’s risk insurance policies are so beneficial in New Jersey:

• They provide coverage for property with changing values: Because normal property insurance isn’t designed to cover buildings with constantly changing values such as buildings still under construction, builder’s risk insurance is important because it allows for reimbursement of a building’s current value. The value of a construction project increases as progress is made, and builder’s risk coverage is designed to factor this in.
• They provide protection to various workers: Builder’s risk insurance policies keep the insurable interests of various people in mind. For example, workers such as electricians often don’t get paid until a job is complete. Beyond just the property owner, various types of construction workers need protection for their work while it’s still in progress.
• They cover gray areas: During a construction project, materials used become part of the building in progress and technically no longer belong to the worker. Builder’s risk helps provide protection for replacement costs of these materials during that gray area of transferring ownership when the project is not yet complete and the final paycheck has not been signed.
• They cover costs if a job has to be redone: If a construction site burns down, not only is that construction work lost, but the entire project will have to be done over again. Builder’s risk insurance provides protection for contractors’ overhead and profit in the event they have to start their job all over again.
• They can be bought for multiple types of projects: Builder’s risk policies can cover many different types of projects in New Jersey, from commercial properties to private houses. Builder’s risk policies may be designed to cover just one building or several. Coverage can also apply to renovations on buildings that are already finished, or be used for a complete remodel.
• They cover many different components of construction: Builder’s risk policies often provide coverage for construction components like scaffolding, fences, expensive signage, lumber, and more. These components can be expensive to replace if stolen, vandalized, or otherwise damaged/destroyed while a project is in progress. So coverage is critical.

Your New Jersey independent insurance agent can help you review your builder’s risk insurance policy to answer any remaining questions about your coverage. They’ll also be able to help you figure out whether you’ve got enough coverage or if you should purchase more.

How Much Does Builder’s Risk Insurance Cost in New Jersey?

The cost of a policy depends on a number of factors, with the biggest one being the end value of the project in question. For example, coverage for a three-bedroom house might only be $500-$1,000 per year, while coverage for a new football stadium would be much higher, perhaps even up into the hundred thousands.

The location of the construction project also factors into the cost of builder’s risk coverage. Property owners and contractors in New Jersey might pay a lot more for coverage than others would in states further inland due to the increased risk of weather-related perils like hurricanes and floods. Even construction projects along the Jersey Shore especially might come with premiums up to 20% higher than in other areas of the state.

Why Work with a New Jersey Independent Insurance Agent?

In order to get the protection you need and deserve, you’ll want to work with a trusted expert. And who could be better for the job than a local agent who shares your area code? Independent insurance agents act as your own personal insurance shoppers, offering you tons more options than one-policy companies. With just one call, they’ll hook you up with multiple quotes.

New Jersey independent insurance agents are armed with knowledge on what coverage is needed in your area, and they’ll get you set up with just enough of it — not too little, not too much. They’ll handle all the heavy lifting so you can rest assured you’ll be set up with the right coverage at the right price.

They’re not just there at the beginning, either. If disaster strikes, your New Jersey agent will be there to help walk you through the claims process and make sure you’re getting the benefits you're entitled to. Now that’s thinking ahead.