Additions, major renovations, and other construction projects completed on a property are not automatically covered by a standard insurance policy while the work remains in progress. Once a contractor finishes a construction project, they will likely reach out to an insurance provider and inform them about the project in order for the revised coverage to reflect the increase in the property’s value. Nevertheless, there is often a significant risk of damage while a construction project is being completed. Therefore, it’s critical for contractors to have Course of Construction insurance coverage.
What Is Course of Construction Insurance?
Course of Construction (COC) insurance, also known as Builder’s Risk insurance, is a unique form of property coverage designed to protect contractors, developers, and property owners over the course of a renovation or other type of residential or commercial construction project. (Subcontractors must carry their own COC insurance).
This type of policy typically provides coverage for three-month, six-month, or 12-month periods. In certain cases, COC insurance can provide coverage for a specified time period after the project has been completed.
What Does Course of Construction Insurance Cover?
What exactly is covered may vary depending on factors such as the insurance provider and your unique coverage needs. However, a standard course of construction policy generally covers (either via optional endorsements or the base policy):
- Wind (limited coverage in coastal regions)
- Hail and lightning
- Vehicles and aircraft
Additionally, some COC policies simply cover the building in question, while others also cover the on-site materials that must be transported to the worksite.
Most COC insurance policies pay for any damages up to the specified coverage limit. This limit should precisely reflect the completed structure’s total value (including the cost of labor and materials but excluding land value).
To determine the limit for your COC insurance policy, you can use your construction project’s budget. Coverage extensions are also offered in some situations. These include:
- Coverage for scaffolding
- Expenses for removing debris from covered property
- Property in transit
- Fire department service charges
- Sewer and drain backup
- Items in temporary storage
What Does Course of Construction Insurance Not Cover?
As beneficial as course of construction insurance is, it doesn’t cover everything. Common exclusions to a standard COC policy include:
- Floods and other water-related damages
- Weather-related damages to items out in the open
- Losses resulting from employee theft
- Bodily injury (intentional or due to job site accidents)
- Government action
- Mechanical breakdown of contractor equipment
- Voluntary parting (willingly giving up equipment)
- Contract agreement penalties
- Damage and losses arising from faulty planning, design, or workmanship: To obtain coverage for these types of claims, you should obtain professional liability insurance.
Note: In certain states, COC policies may include flood and earthquake coverage.
The Cost of Course of Construction Insurance
Builder’s risk insurance premiums typically depend on several factors, including:
- The types of insured parties (general contractor, developer, owner, etc.)
- The age and size (square footage) of the property
- Existing structures (any already standing buildings of high value)
- Covered perils: events named in the insurance policy (fire, lightning, theft, vandalism, etc.)
According to CoverWallet, the rate of COC insurance is generally 1 to 4% of the total construction cost. For large construction projects, monthly premiums can be as high as $2,000. Be sure to always clearly explain to your insurance provider what your needs are and review the budget for your construction project.
Get Comprehensive Course of Construction Insurance From JMG
Reach out to the professionals at JMG Insurance Agency for more information on what a course of construction insurance policy covers.
Since 1916, we have been committed to providing high-quality insurance solutions to clients throughout Connecticut, New Jersey, New York, Hawaii, and Massachusetts. As an independent agent, we work closely with multiple stable and reliable insurance carriers.
If you’re a contractor, sub-contractor, developer, or property owner, you can benefit substantially from acquiring builder’s risk insurance coverage.
This type of coverage will protect the building you are working on for a renovation or other construction project. We include builder’s risk coverage — which shields structures against incidents of vandalism, theft, and storm damage — in our construction insurance policies. For large projects, you can obtain “premium coverage.”
Our construction policies’ COC coverage does not pay for claims arising from faulty workmanship, job-related injuries, advertising injuries, or defamation. The commercial and contractor general liability coverage area of our policies will pay for these types of claims.