What type of expense does the "soft costs" coverage in Builders Risk typically cover?

"Soft costs" coverage in Builders Risk insurance is specifically designed to cover financial losses that are not directly tied to physical construction expenses, but rather to expenses that arise as a result of project delays. This can include items such as lost profit, additional interest costs on loans, and other overhead expenses that a builder may incur if the project takes longer than expected to complete.

The reason this coverage is important is that delays can significantly impact the overall financial health of a project, and soft costs can sometimes exceed the hard costs associated with direct construction. In contrast, direct construction costs involve material and labor expenses, while costs related to equipment rental are also part of the direct costs associated with the physical aspects of construction. Tax liabilities typically do not fall under the umbrella of Builders Risk insurance, as these do not directly relate to the construction process or delays. This context clarifies why financial losses due to delays are rightly characterized under soft costs in the scope of Builders Risk coverage.