A structure under construction is uniquely vulnerable. It is exposed to the elements, accessible to thieves, and not yet protected by a homeowners or commercial property policy. Builders risk insurance fills this gap — covering the structure and materials from the first day of construction through completion.
What Is Builders Risk Insurance?
Builders risk insurance (also called course of construction insurance) covers a building or structure while it is under construction. It protects against:
- Fire
- Wind and hail
- Lightning
- Theft of materials
- Vandalism
- Collapse
- Water damage (from rain, snow, or construction-related water intrusion)
Coverage applies to the structure itself, materials stored on-site, and in some cases materials in transit to the job site.
Who Needs Builders Risk Insurance?
Property owners. If you are building a new home or commercial building, you need builders risk coverage from the start of construction until the building is complete and a permanent property policy is in place.
General contractors. Many GCs carry builders risk as part of their standard project coverage, or require the property owner to carry it. Check your contracts carefully.
Renovation contractors. Major renovations — additions, gut renovations, structural work — may require builders risk coverage for the portion of the structure being worked on.
Developers. Real estate developers building speculative or pre-sold properties need builders risk coverage for each project.
What Builders Risk Does NOT Cover
Contractor's tools and equipment. Tools and equipment are covered by a separate tools and equipment policy, not builders risk.
Liability. If someone is injured on the construction site, that is a general liability claim, not a builders risk claim.
Faulty workmanship. Damage resulting from poor workmanship is typically excluded. Builders risk covers external perils, not the quality of the work itself.
Earthquake and flood. Standard builders risk policies typically exclude earthquake and flood. Separate coverage is available for these perils.
Soft costs. Standard builders risk covers the physical structure and materials. Soft costs — architect fees, permit fees, loan interest during construction delays — require a soft costs endorsement.
How Builders Risk Is Priced
Builders risk premiums are typically 1–4% of the total construction value, depending on:
- Type of construction (wood frame vs. masonry vs. steel)
- Location and local weather risks
- Security measures on the job site
- Project duration
- Coverage limits and deductibles
A $500,000 construction project might carry a builders risk premium of $5,000–$20,000 for the duration of construction.
Policy Duration and Completion
Builders risk policies are written for a specific project duration — typically 6, 12, or 18 months. If construction runs over schedule, the policy needs to be extended. Failing to extend coverage leaves the project uninsured.
When construction is complete and the building is occupied or ready for occupancy, the builders risk policy ends and a permanent property policy (homeowners or commercial property) takes over. There should be no gap between the two.
Soft Costs Coverage
A major loss during construction can cause significant delays — and delays cost money beyond just the physical damage. Soft costs coverage pays for:
- Additional architect and engineering fees
- Additional permit fees
- Loan interest during the extended construction period
- Real estate taxes during the delay
- Rental income lost due to delayed completion
For larger projects, soft costs coverage is worth the additional premium.
The Bottom Line
Builders risk insurance is essential for any significant construction project. The structure is most vulnerable during construction — before it has a permanent roof, before it has a permanent property policy, and when it is most accessible to theft and vandalism.
Talk to a RightQuote advisor about builders risk and contractor insurance, or explore business insurance options.
Part of the Contractor Insurance Guide.