Read the episode transcript
Aaron Bollinger (00:00)
Hello everybody, welcome to the Speaking of Insurance podcast. My name is Aaron Bollinger back at it with another sympathy video towards the California contractors and people who are undergoing renovations for their house, people who are investors, real estate agents, whoever you are, this video should apply to you. And so I would like to start this podcast off with a little example. So imagine you're building a $750,000 home. Now you're not Bob the Builder, you are a non-licensed contractor. If you
Aaron Bollinger (00:30)
Are like the average person and you're not a licensed contractor, you're gonna to hire somebody. But let's put ourselves in the shoes of the contractor. You spent months planning it, you've hired the architect, secured the permits, brought in your subcontractors to help do the work, ordered your materials, and you're finally starting to see the project come together. Voila. The framing is finished, electrical work is underway, and you've got expensive materials stored on the job site, just like at any traditional job site or most of them, you're going to have something stored there. At night, if a fire were to break out,
Aaron Bollinger (01:00)
And of course, because it's at night, and this is the worst case scenario, the fire department is going to take a while to get there. And by the time they get the situation under control, odds are that the structure is partially, if not fully, destroyed. You're looking at hundreds of thousands of dollars in damage, additional construction expenses, scheduling problem problems. And I would argue the biggest thing is the delay, because there's months of delays, potentially years of delays that this could have an impact on.
Aaron Bollinger (01:29)
And the one thing that you can't get back is time. But what you can control and ask yourself and figure out is who is paying for all that. And so money is another big factor. So is it the general contractor? You. Is it the homeowner? Not you. Does the contractor's general liability insurance cover it? Maybe. Does the homeowner's existing insurance policy respond? Maybe. Or does everybody suddenly realize that nobody purchased the insurance specifically designed to protect the construction project itself? Ding, ding, ding, ding.
Aaron Bollinger (01:58)
That last scenario is exactly what we want to avoid. And that's what we're gonna be talking about today. That's why this is gonna be a whole podcast is talking about the different situations, the different statistics, and the different ways that this type of insurance, it's mass magical type of insurance, builders' risk insurance, can help people who are doing renovations, people who are working on the renovations actively, people who are interested in potentially in the future doing renovations, whatever it is, because there's a very important distinction in insurance between protecting yourself against liability.
Aaron Bollinger (02:28)
and protecting the actual property you are constructing, you are inhabiting. So that's what we're gonna be talking about. The distinction, the targeted and largest financial exposures in construction, the industry data, and what contractors and property owners should understand before starting their knock next project.
Aaron Bollinger (02:51)
And today we're going to be talking. First, what exactly is builder's risk insurance? Builder's risk is a form of property insurance designed to cover buildings and certain construction-related property while a project is being built or renovated. You'll sometimes hear it called course of construction, COC insurance.
Aaron Bollinger (03:07)
Unlike a traditional homeowner's policy, which is generally designed around an existing residential property, builders' risk is specifically intended to address the changing exposures associated with construction and the construction of that home. And these exposures are significant. Think about a normal construction site. You have partially completed structures, temporary electrical installations, combustible materials, workers performing hot work, deliveries arriving throughout the week, potentially thousands of.
Aaron Bollinger (03:36)
To hundreds of thousands of dollars in materials that haven't been installed yet. Depending on the policy, builder's risk can provide coverage for physical damage caused by events like fire, that we mentioned, wind, certain theft losses, vandalism, and other additional causes of loss. But I want to emphasize this one thing, and that is that not every builder's risk policy is identical. And so this is the one thing that we always have to highlight: it depends on the specific policy form.
Aaron Bollinger (04:03)
Some policies are written on a broad or special cause of loss basis, and all of them are subject to exclusions. Others are much more restrictive. And so we like to recommend the more broad and special cause of loss basis written policies. Coverage for theft, materials and transit, temporary structures, flood, earthquake, and soft costs can vary very substantially, very, very substantially. So V A R Y very substantially.
Aaron Bollinger (04:31)
What I mean by that is that earthquake is traditionally probably not covered, has to be endorsed on or written separately, flood as well, and some of the temporary other things that we talked about as well, temporary structures. So when someone says I have builder's risk insurance, my question would be, what does your builder's risk insurance actually cover? Just like how what what's your auto insurance? What's your homeowner's insurance? But this is for active construction projects that are essential to the California and US economy and the developing of new homes.
Aaron Bollinger (05:01)
Renovating of existing homes, et cetera, et cetera. Because having a policy and having the right policy are two very, very different things. So I want to clear up one of the biggest misunderstandings in contractor insurance. A contractor might say, Aaron, I already have a million-dollar general liability policy. Why would I need builder's risk? And the answer comes down to what the two policies are designed to do and what they cover. GL, general liability insurance, primarily addresses certain claims.
Aaron Bollinger (05:28)
Alleging bodily injury or property damage for when the insured is legally liable, subject to, of course, the exclusions. But builder's risk is designed to insure covered physical loss or damage to the construction project itself. So it's the construction project itself, not the people on it, not the liability and property damage from which you can be legally liable, but the actual coverage of the physical loss or damage to that construction project. So obviously that sounds a bit nuanced. It sounds like they could cover the same thing 100%.
Aaron Bollinger (05:56)
But I think an example will better illustrate this. You're a GC, general contractor, constructing a custom home. A visitor walks onto your property and they chip over construction materials and they suffer an injury. They scrape their knee. Hopefully it's not too bad. But that would usually be a GL claim, general liability claim. Obviously, it depends on the circumstances and the policy. I've got to say that every time. Now imagine instead a windstorm damages that partially completed roof. Nobody was negligent. There isn't necessarily another party to sue.
Aaron Bollinger (06:25)
But the building has sustained physical damage and there's nobody to blame except for natural causes. That's the type of property exposure builder's risk is designed to address, assuming that wind is covered under the policy. Here's another important detail: is that a contractor's GL policy, general liability, may contain exclusions relating to property in the contractor's care, custody, or control, or to the particular part of the property on which the contractor is performing operations. So
Aaron Bollinger (06:53)
Those provisions and those exclusions and common misunderstandings of what's existing in the GL side could actually prevent coverage from being there for the damaged property on the actual project. So you should never assume that GL automatically replaces builder's risk or COC. And the reverse is also true. Builders risk does not replace general liability. One protects against certain property interests in the construction progress
Aaron Bollinger (07:22)
one protects certain property interests in the construction project, and the other addresses certain liability exposures. They serve different purposes, and on many projects, both are absolutely crucial and needed. This is where things should get complicated, is when you ask who should buy the policy? Should the homeowner purchase builder's risk? Because it sounds like they'd want the structure covered. Is it the GC? What about the developer? And so the answer obviously is going to depend.
Aaron Bollinger (07:47)
On construction agreement, ownership interest, financing requirements, and how the project is structured. For example, a homeowner building a custom residence may arrange the coverage on another project. The GC, general contractor, may be responsible for obtaining it. A developer may purchase a policy covering an entire project as well. So on certain commercial developments, financing agreements specifically identify the insurance requirements that then insinuate.
Aaron Bollinger (08:15)
And give you an indication as to who is buying that policy. But the important issue isn't whose name is on the invoice. It's making sure that the parties are all understood and all of those that have an insurable interest in the project are protected under that policy as well. So owners, contractors, subcontractors, making sure that their interests appear on that insurance is very important. Imagine the project where a contractor believes the owner is providing builder's risk and the owner believes the contractor has it already.
Aaron Bollinger (08:45)
Nobody verifies the coverage, and a major fire occurs. Of course, everybody is pulling out their construction agreements, reviewing insurance certificates, trying to determine who is supposed to arrange the coverage and buy the coverage. That's a terrible time to discover a misunderstanding that could have been stopped in the first place when you coordinate who's getting the builder's risk insurance coverage for my property. My advice is to resolve this before construction begins. Determine who's purchasing the property, who needs to be insured, what property is covered, and what happens if the project extends beyond.
Aaron Bollinger (09:15)
The expected completion date. And don't solely rely on somebody saying, hey, we're insured, because I don't trust that. Not that I don't trust the person who's saying it, just that it needs to be validated and backed up. So ask for the serious and legit coverage details. So let's talk about a risk that is especially frustrating for contractors and people of all types, and that's theft. Nobody likes thieves, you know, it has a weird
Aaron Bollinger (09:44)
tone to it, and I obviously it's very negative. But construction sites contain valuable items, of course, materials, equipment, often at locations that are difficult to completely secure. Copper wiring, electrical parts, plumbing materials, lumber, appliances, other construction supplies are targets of theft. Imagine you receive a shipment of high-end appliances for residential development that you're doing. The materials arrive on Friday. Installation isn't scheduled until Tuesday.
Aaron Bollinger (10:13)
Hopefully you're able to coordinate with your job timing. But if not, and it's uncontrollable, I get it. Happens with the post office for me all the time. Over the weekends, somebody could easily break in, not easily, but they could break in and steal tens of thousands of dollars worth of appliances. So you've got two problems then, the financial loss and the construction schedule, because replacing those appliances can take weeks. But if, it takes days, still you have the insurance question of whether the insurance is covering it. And so you have to go coordinate with the insurance company as well.
Aaron Bollinger (10:43)
Who's covering those materials at the location and under those circumstances? Some policies sneakily contain theft exclusions, security conditions, limitations, and specific requirements concerning covered property. And so we also have to distinguish building materials from contractors' tools and equipment. A policy can cover materials intended to become a part of the building. So you think about the frame, you think about the different parts, the doors.
Aaron Bollinger (11:11)
Think about the windows, all those being covered, but the portable tools could not. And that distinction distinction is absolutely crucial because a $40,000 piece of contractor equipment and $40,000 worth of building materials not being treated the same way could be catastrophic.
Aaron Bollinger (11:29)
Contractors equipment coverage, usually called inland marine, may need to be added for those specific tools instead of being covered by that builder's risk policy. And so if you're working on multiple projects, you need to think about where are the materials that I have located? Job site, warehouse, suppliers facility, transportation, are they being transported? Don't assume that all the situations are going to be identical because they truly aren't. The lesson here is that the physical location and ownership of construction materials can be just as important as their value.
Aaron Bollinger (11:59)
So I want to bring some actual numbers in because it's a doozy. I know. And construction site theft is not just a theoretical problem. On July 2026, the National Roofing Contractors Association, the NRCA, I'm sure there's something else that's called the NRCA, but National Roofing Contractors Association highlighted findings from the True Look and Noonlight State of Construction Site Security Reports. The report examined 2639 confirmed break-ins.
Aaron Bollinger (12:27)
At monitored construction sites during 2025. 50% increase from the previous year. More than 40% of the break ins happened on weekends. The highest risk time was between 11 p.m. and 3 a.m. So the night crawlers, the people, maybe not nightcrawler, great movie, by the way. But the people who are up late at night, the nocturnal people are up there at the job site breaking in on the weekend. So think about that, what that could mean for you as a contractor. You spend Monday through Friday.
Aaron Bollinger (12:56)
Running an efficient project, you're coordinating all of your subcontractors, managing the schedule, trying to stay within budget, but your biggest exposure of theft could happen on the weekend and you cannot control it entirely. That's horrible. And so when nobody's there,
Aaron Bollinger (13:11)
One thing that I found especially interesting is that the report identified unsecured gates and after hours access as recurring concerns. These findings come from monitored sites. So they shouldn't be interpreted as the national construction theft rate, but they illustrate a serious and very practical problem in terms of the fact that if this is just at monitored job sites, imagine what's happening at the unmonitored ones. Security is a serious part of your risk management. Insurance is another part. Having both of them working together is amazing.
Aaron Bollinger (13:41)
If your contractor installs cameras, secures access points, controls keys, documents deliveries, maintain a perfect inventory. You might be better positioned to prevent losses and document what happened if a theft occurs than somebody who is not. But physical security does not establish insurance coverage, but it could help with your insurance coverage as well. And here's a very recent example that I'd like to discuss that talks about this. In October 2026, so right here.
Aaron Bollinger (14:09)
Authorities in San Antonio reported charges involving more than $30,000 in construction materials alleged stolen from new home construction sites. The report materials included roofing shingles. Think about how disruptive that could be. When the value of the solar materials is relatively modest compared to the total project, you can still face the replacement delays. So it doesn't matter if it's just a few thousand dollars. You've got to go get that exact thing that you were building before.
Aaron Bollinger (14:33)
To properly set it up based off of your project plans, or you have to change the project plans, which could take even longer. And you have to reschedule your labor. And the unexpected expenses that can come up out of that as well are horrible. And so for the big picture, according to the US Census Bureau on October 1st, 2026, total US construction spending in August was running a seasonally adjusted annual rate of approximately 2.203 trillion with a T.
Aaron Bollinger (15:03)
trillion and private non residential construction was seven hundred seventy three billion.
Aaron Bollinger (15:09)
Private residential construction alone was $882 billion annually. Absolutely ridiculous. So if you are doing even a sand, a little pebble worth of these numbers, a very small percentage, and you are in California, you are in any state in the United States of America or anywhere and you're running construction sites, please, for all of us, put the cameras up, practice the safety procedures.
Aaron Bollinger (15:36)
Practice the risk mitigation programs and get the builder's risk insurance. If you don't think you should be the one that gets it, go talk to your developer and go talk to the homeowner and coordinate as well. Everybody involved needs to understand what the insurance actually does and doesn't cover. Because the worst time to discover an insurance gap is after something has already happened.
Aaron Bollinger (15:56)
Here at Bollinsure we review the project, discuss the exposures, and explore the coverage options that may be available through the appropriate insurance markets. If you're already in the middle of a construction project, it's still worth reviewing your current arrangement to make sure they reflect the actual project. I'm Aaron Bollinger. This has been Speaking of Insurance Podcast, brought to you by Bollinsure our family agency and office. Thank you for listening, and I'll see you all in the next episode. Happy Friday.
