Contractors and builders should examine the builder's risk insurance exclusions included in their contracts. Since so much possible damage isn't covered under these policies, you may need to purchase riders and additional coverage to protect from certain likely exposures.
Explosions and Disasters
The most common perils excluded from builder's risk insurance include any property loss caused by: • Contamination and deterioration • Cracking, settling, bulging, expanding or shrinking of materials • Criminal acts • Earth movement and earthquakes • Electrical currents • Explosions, bursting and ruptures • External water damage • Flood damage • Mildew, mold, rot, fungus rust and associated corrosion • Pollutants and debris • Steam boiler explosion (which can be covered by a boiler and machinery policy) • Temperature and humidity-related damage, such as dampness (freezing loss can be an exception) • Vermin and insects • Volcanic action • Weather-related damage from rain, slow, sleet and ice • Wear and tear of materials.
Floods and Earthquake Endorsements
Earth movement includes landslides, earthquakes and occasions in which the earth beneath or around property sinks, rises or shifts. Fire and explosions caused by earthquakes are typically covered by builder's risk policies (as are, most fires, no matter the cause). The direct loss caused by volcanic eruption, and any blasts, shock waves, ash or lava flow are usually excluded. If you're building in an area that's exposed to volcanoes and earthquakes, these exposures will require additional insurance. The deductibles and premiums will be much higher. Private insurers may not offer this type of coverage, which is generally provided by the National Flood Insurance Program or state earthquake insurance policies.
Other Common Exclusions
Other common builder's risk insurance policy exclusions include losses caused by extreme political actions and hazards, such as: • Acts of war and military action, including civil wars and acts of rebellion and revolution • Law or ordinance violations, in case a project manager and architect fail to obtain necessary permits • Governmental action: If a governmental authority orders a property to be destroyed or seized • Nuclear hazard and radioactive contamination, unless it causes a fire. Builders and contractors can purchase additional coverage for: • Contract violation, including the failure of a person or organization to act or make a decision • Faulty planning, zoning, development, design or worksmanship • Protection of property in transit to cover theft of materials handled by hired external carriers. If your project experiences damage from a covered cause, review how to file a builder's risk insurance claim.