In the maritime industry, building or refurbishing yachts and commercial vessels is a complex process filled with risks. Every stage—from initial planning to final outfitting—can expose owners, contractors, and investors to potential losses. Builders Risk Insurance plays a critical role in this environment, offering essential financial protection against damage or disruptions during construction or repair projects.
Builders Risk Insurance is a specialized policy designed to safeguard vessels while they are under construction or undergoing major repairs.
Here's how it usually works.
Coverage During Construction: This policy covers the vessel while it is being built or repaired. It typically includes protection against fire, theft, vandalism, and natural disasters that could damage the vessel before completion.
Protection for Contractors and Owners: Either the shipyard, contractor, or vessel owner—or all parties—can purchase builders risk insurance. This ensures shared protection if unexpected damage or delays occur during the build or repair phase.
Customizable Coverage: Policies can be tailored to the specific needs of the project. Coverage limits, deductibles, and covered risks may vary based on the size and value of the vessel, the construction timeline, and any unique project requirements.
Temporary Nature: Builders risk insurance is temporary and only applies during the construction or repair period. Coverage ends once the project is completed, delivered, or accepted by the owner.
Important for Financing: This type of insurance is often required by lenders before they agree to finance a marine construction project. It provides assurance that the investment is protected while the vessel is being built or restored.
Special Considerations for Yachts and Commercial Vessels: Coverage may include high-value components such as custom fittings, onboard systems, and specialized navigation or communication equipment. It can also extend to risks during transportation if the vessel is moved as part of the build or repair process.
Frequently Asked Questions
Who typically buys builders risk insurance for marine projects?
It can be purchased by the vessel owner, the shipyard, or the contractor. Sometimes all parties are named on the policy to ensure complete project protection.
Does builders risk insurance cover delays in construction?
Most standard policies do not cover delays unless optional coverage for soft costs or business interruption is added.
What types of losses are excluded?
Typical exclusions include normal wear and tear, poor workmanship, design flaws, and intentional damage.
Can coverage include equipment and materials in transit?
Yes, many policies allow for optional coverage of materials, equipment, or the vessel itself while in transit during construction.
What happens once the vessel is completed?
Once the project is finished, builders risk coverage ends. At that point, the vessel should be covered under a standard hull or marine insurance policy.
Still have questions? Talk to a local insurance expert.