Builders Risk Insurance: The Ultimate Guide & What You Need to Know in Colorado

In Colorado, Builders Risk Insurance is an insurance product designed to protect structures under construction or renovation. This policy can be acquired by either the property owner or the general contractor and includes every stage of the construction process, from the initial planning stages to the final acquisition of a Certificate of Occupacy.

The Colorado Division of Insurance oversees builders' risk policies in the state, outlining strict guidelines for coverage limits and required insurance amounts to protect contractors and property owners from financial hardship due to unexpected events during the construction or renovation of a building.

Understanding Builders' Insurance in Colorado

Builders' Insurance in Colorado operates similarly to such policies in other states. Its goal is to protect the contractor and property owner from financial loss due to unforeseen incidents during construction or renovations. Typically, this coverage safeguards against damages from fire, theft, vandalism, windstorm, hail, lightning, and explosions.

This temporary policy is designed to last for the duration of the project. It's important to note that builders' insurance does not cover damage caused by substandard workmanship, defective materials, or negligence from the contractor or property owner.

Coverage Scope of Colorado Builders' Risk Insurance

Builders' risk insurance is specifically designed to protect against risks that occur during the construction or renovation process. This policy covers physical damage to a structure resulting from:

• Windstorm
• Hail
• Lightning
• Explosions
• Theft
• Vandalism
• Fire or explosion
• Vehicle collision

Additionally, builders' risk insurance can cover the cost of debris removal and the replacement of temporary structures like scaffolding.

Remember, builders' risk insurance does not cover damage caused by faulty workmanship, defective materials, or negligence by the contractor or property owner. Furthermore, this coverage does not provide liability protection for the contractor or property owners.

The Need for Builder's Risk Insurance in Colorado

If you have a financial interest in a construction project in Colorado, it's highly recommended to secure builders' risk insurance. This coverage can offer peace of mind and protect you from unexpected financial losses due to accidents or other unpredictable events during the construction or renovation project.

Here is a list of individuals who should consider being included in your builders' risk insurance policy:

• Property owner
• General contractor
• Subcontractors
• Material suppliers
• Equipment lessors
• Lenders
• Architects

Beyond having adequate coverage, it's crucial to understand your responsibilities as the property owner or general contractor. Thoroughly review all contracts and understand who is liable in the event of damage or delays due to unforeseen incidents.

Calculating Builder’s Risk Insurance Cost in Colorado

Several factors influence the cost of your builders' risk insurance policy in Colorado:

a) Project type: The nature of the project can significantly affect the cost. Whether you are building new construction, renovating, or remodeling will influence the policy's price.

b) Location: The cost of builders' risk insurance can vary based on the project's location. Areas with a higher risk of natural disasters, such as wildfires or floods, typically cost more to insure.

c) Construction type and materials: More complex or expensive materials and construction methods will result in higher insurance costs.

d) Expected completion date: Projects with a shorter expected completion date will usually be cheaper to insure because there's less time for potential damage to occur.

e) Amount of Coverage: The more coverage you purchase, the higher the cost, as there's more risk for the insurer.

f) Contractor’s Expertise: Contractors with a proven track record of successful projects may receive discounts on their insurance policies due to their lower risk profile.

g) Claims History: Your claim history significantly influences the cost of builders' risk insurance. If you have a history of filing claims, your premiums will likely be higher than someone with a clean claim history.

h) Deductible: The deductible you choose for your policy also affects the cost of builders' risk insurance. A higher deductible generally results in a lower premium, as the insurance company will cover less of the cost in the event of a claim.

Usually, a builder's risk insurance policy costs between 1-5% of the total construction budget. For instance, if your construction budget is $200,000, a one-year builder's risk policy could range from $2,000 to $10,000 per year in premiums.

Does Builders Risk Insurance Cover Liability in Colorado?

Builder’s risk insurance in Colorado is not designed to cover liability. It is a form of property insurance that covers the property under construction, as well as the materials and equipment associated with the project. This insurance does not provide protection for any potential legal liabilities resulting from accidents or damage caused by the contractor or anyone else involved in the project. Therefore, it is crucial to secure an additional liability insurance policy to provide protection in legal disputes or claims.

Liability insurance can help cover legal costs if someone suffers injury or property damage due to your work, and it can also provide coverage for certain types of malicious acts.

Questions to Ask Your Insurance Company Before Purchasing Builder's Risk in Colorado

Before purchasing builders' risk insurance in Colorado, it's essential to ask your insurance provider some critical questions to ensure you're getting the coverage that best suits your needs. These questions could include:

• Does the policy cover all construction materials, equipment, and labor?
• Does the policy cover losses due to theft or vandalism?
• Is there a deductible required for this type of insurance?
• Does the policy cover losses due to natural disasters?
• Does the policy cover liability claims?

At 3R Insurance Agency, we're committed to providing the best options for builders' risk insurance in Colorado. If you have any questions or would like to discuss your project with one of our experienced representatives, please don't hesitate to contact us today.

We look forward to helping you secure the right type of coverage for your project!