The Oklahoma Contractor’s Guide to Builder's Risk Insurance

Introduction: Your Guide to Builder's Risk Insurance

Builder's Risk insurance is a type of property coverage that protects your projects while they're under construction. It's designed to cover damage from risks like fire, theft, and weather. This guide will break down what it is, why it matters for Oklahoma contractors, what it covers, and the common mistakes to avoid.

Why It Matters for Oklahoma Contractors

A job site is an unpredictable place, and a single bad day can turn a profitable project into a financial nightmare. Builder's Risk insurance is designed to cover the cost of damage to the actual building and materials while the project is in progress.

It’s different from your General Liability policy. General Liability covers damage your work causes to other people's property. Builder's Risk protects the project itself.

Imagine a classic Oklahoma thunderstorm rolls through and knocks down the framing on a new build. Your General Liability policy won't touch that. A Builder's Risk policy is made for exactly this kind of scenario.

Real-World Risks on the Job Site

These aren't just hypotheticals. These are the kinds of things that happen every day and can sink a business without the right coverage.

Theft and Vandalism: A nearly finished project gets hit overnight. Thieves steal new appliances and copper wiring, causing thousands in damage and delaying the project's closing by a month.
Fire Damage: A subcontractor is welding, and a single spark ignites nearby materials. The fire damages the roof and ductwork, and the water from the fire department ruins the new sheetrock below.
Structural Collapse: After a week of heavy spring rains, the saturated ground causes a basement wall to collapse, leading to expensive repairs and major schedule setbacks.

In every case, the cost isn't just about replacing materials. Project delays lead to other expenses, like extra interest on a construction loan or fees for new permits. This is why Builder's Risk coverage is so essential.

What It Covers and What It Doesn’t

Understanding what a policy includes helps you know what you're paying for. Coverage is usually broken down into "hard costs" and "soft costs."

What's Usually Covered

This is the core of the policy, protecting the physical parts of your project.

The Structure Itself: This includes the building from the foundation up, covering framing, roofing, electrical, plumbing, and permanently installed fixtures like cabinets and HVAC systems.
Building Materials: Lumber, drywall, windows, and other supplies are covered, whether they are on the job site, on their way to the site, or stored at a temporary location.
Temporary Structures: Things like scaffolding, construction forms, and job site fencing are often included.
Debris Removal: If a covered event like a fire damages the project, the policy helps pay to clean up the mess so you can start rebuilding.

What's Usually Not Covered

Just as important is knowing what isn't covered. A standard policy will not cover everything, and you may need a separate policy or an add-on for these items.

Earthquake & Flood Damage: These are critical add-ons to consider in Oklahoma.
Employee Theft: This is covered by a different policy called Crime Insurance.
Your Tools & Equipment: You'll need separate Inland Marine coverage for your tools.
Liability for Injuries: This is what your General Liability and Workers’ Comp policies are for.
Faulty Workmanship: The policy won’t pay to fix a subcontractor’s mistake. However, if that mistake causes other damage (like a bad pipe bursting and flooding the first floor), the policy would likely cover the resulting water damage.

Who Needs It and When

A common question is who is responsible for buying the policy. The short answer is that anyone with a financial stake in the project needs to be protected by it.

This includes:

Property Owners & Developers
General Contractors
Subcontractors
Lenders

Who Buys the Policy? Check the Contract.

There is no single rule for who buys the policy. This must be clearly defined in the construction contract to avoid dangerous gaps in coverage.

Often, the property owner or general contractor will purchase the policy and name all other parties (like subcontractors and lenders) as "additional insureds." This is a critical step. If you are a subcontractor, being told you’re "covered" isn't enough. You need to be formally listed on the policy.

Timing is Everything

You must have a Builder's Risk policy in place before the first materials arrive on site. You can't get coverage for a project that is already underway.

The policy typically ends when the project is completed and turned over to the owner, the property is sold, or the building is occupied. That last point is a big one. If a homeowner starts moving in while you're still finishing up, that could void your policy.

Oklahoma-Specific Insights

While Builder's Risk principles are the same everywhere, Oklahoma contractors face a unique set of local rules and risks.

State Rules vs. Real-World Requirements

The Oklahoma Construction Industries Board (CIB) does not require you to have Builder's Risk insurance to get your license. However, in the real world, it’s almost always required by others:

Lenders: No bank will give you a construction loan without it.
Public Projects: Cities and counties can require you to carry it on their projects.
Contracts: Most general contractors and project owners will demand it in the contract.

Weathering Tornado Alley

Living and working in Oklahoma means severe weather is a primary risk. Tornadoes, hail, and intense wind can destroy a project in minutes. Because of this, you must have robust coverage for wind and hail. A cheap policy might have a very high deductible for wind damage, which could leave you with a massive bill.

It's also smart to talk to your agent about flood coverage, especially for projects in eastern Oklahoma.

How Your Rate Is Influenced

The cost of a Builder's Risk policy is influenced by several key factors, not a flat rate. Think of it like this:

Project Value: Higher value projects cost more to insure.
Location: A site in an area with higher crime or weather risk will have higher premiums.
Construction Type: Wood-frame projects typically cost more to insure than those built with fire-resistant materials like steel.

Mistakes to Avoid

A few common mistakes can lead to denied claims or leave you dangerously underinsured.

Underinsuring the Project. Don't insure the project for the loan amount. You need to insure it for its 100% completed replacement cost. If you don't, your claim payout could be reduced, forcing you to cover the difference.
Letting Coverage Lapse. Builder's Risk policies have a fixed term. If your project gets delayed, you must contact your agent to extend the policy before it expires.
Ignoring Policy Conditions. Your policy will have conditions, or "warranties," you must meet, like having security fencing on site. If you fail to meet these conditions, a claim for theft could be denied.
Mishandling Remodeling Coverage. When renovating, be clear with your agent. Do you need to cover just the new addition, or the new work plus the entire existing structure? A misunderstanding here can be catastrophic.

Frequently Asked Questions

Does Builder's Risk cover my tools?

No. Your tools and mobile equipment require a separate policy called Inland Marine insurance.

What if a change order increases the project's value?

You must notify your insurance agent immediately to increase your coverage limit. If you don't, you could be underinsured.

Does this policy cover me if someone gets hurt on site?

No. Builder's Risk is for property damage only. Injuries are covered by your General Liability and Workers’ Compensation policies.

Can I get a policy after my project has started?

It is very difficult and not recommended. Always secure coverage before any work begins.

Takeaway Summary

Protecting your projects is just as important as protecting your business. Builder's Risk is the safety net for your investment of time, money, and materials.

Key Things to Remember:

Builder's Risk protects the project. General Liability protects you from claims by others. You need both.
Always insure for the 100% completed value of the project.
Track your policy's expiration date and extend it if your project is delayed.
Make sure your contract clearly states who is buying the policy and that you are listed as an additional insured.
In Oklahoma, pay special attention to coverage for wind and hail.

When you talk to your insurance agent, you're in charge. Use this checklist to make sure you're getting the right protection for your next job.

Your Agent Conversation Checklist

Is this policy for the total completed replacement cost of the project?
Are my subcontractors and I listed as additional insureds?
What are the deductibles for wind and hail?
Should we add soft cost coverage to this policy?
What site security am I required to have?
What is the policy expiration date and how do I extend it?