Builder’s Risk Insurance

Every construction project is an investment in progress. From the first load of lumber to the final walkthrough, your structure, materials and equipment are exposed to fire, theft, vandalism and severe weather. Builder’s Risk Insurance, also known as course of construction insurance, is a temporary property policy that protects a building while it is under construction or renovation, along with the materials, fixtures and supplies that will become part of it. Whether you’re a homeowner building a new home, a general contractor or a developer, builder’s risk coverage keeps a single loss from derailing your schedule and your budget.

What Is Builder’s Risk Insurance?

Builder’s risk insurance is a specialized property policy designed for buildings that are still being built. A standard homeowners or commercial property policy is not designed to cover a structure under construction, so builder’s risk fills that gap for the length of the project. It covers the building itself and the materials, fixtures and equipment intended to become part of it, whether they are on site, in transit or in temporary storage, until the project is completed.

Why Do You Need Builder’s Risk Insurance?

Construction sites are uniquely exposed. Walls are open, materials are stored outdoors and expensive fixtures often arrive before the doors lock. A single fire, windstorm or theft can stall a project and leave the owner or contractor paying to rebuild twice. Builder’s Risk Insurance is crucial because it provides:

• Financial Protection for Your Investment: Pays to repair or replace damaged work in progress and stolen or destroyed materials, so you don’t fund the rebuild out of pocket.
• Compliance with Lender and Contract Requirements: Construction lenders and most construction contracts require builder’s risk coverage before work begins or before loan funds are released.
• Peace of Mind and Schedule Protection: Faster recovery from a covered loss means less downtime, and optional soft cost and delay coverage can help with extra interest, fees and lost income when completion is pushed back.

What Does Builder’s Risk Insurance Cover?

Most builder’s risk policies are written on an “all-risk” basis, meaning they cover direct physical loss from any cause that is not specifically excluded. Coverage varies by carrier, but a strong policy typically includes:

The Structure Under Construction

Covers the building or addition being built, including foundations, framing, roofing and installed systems, against fire, lightning, wind, hail, explosion and vandalism.

Why It’s Important: The building is your largest exposure, and its value grows every day the project moves forward.

Building Materials and Supplies

Protects lumber, drywall, roofing, windows, wiring, HVAC units and fixtures that will become part of the structure, whether they are on site, in transit or in temporary off-site storage.

Why It’s Important: Materials are often delivered weeks before they’re installed, making them a prime target for theft and weather damage.

Temporary Structures

Covers scaffolding, construction forms, fencing, job site trailers and other temporary works used to complete the project.

Why It’s Important: Replacing temporary works after a storm adds unplanned costs and delays to your project.

Theft and Vandalism

Pays for stolen or vandalized building materials and damage to the work in progress, subject to the policy’s site security conditions and sublimits.

Why It’s Important: Job site theft of copper, appliances and lumber is one of the most frequent builder’s risk claims.

Soft Costs and Delay in Completion

An optional extension that covers extra loan interest, permit and architect fees, additional insurance costs and lost rental income when a covered loss delays your completion date.

Why It’s Important: On financed projects, the cost of a delay can be as large as the physical damage itself.

Debris Removal and Ordinance or Law

Helps pay to clear debris after a covered loss and to rebuild to current building codes when regulations require upgrades.

Why It’s Important: Cleanup and code upgrades are often overlooked costs that can add up quickly after a loss.

What Builder’s Risk Insurance Doesn’t Cover

Knowing the exclusions is just as important as knowing what’s covered. Common builder’s risk exclusions include:

• Faulty Workmanship, Design or Materials: The cost to correct defective work is generally not covered.
• Wear and Tear: Normal deterioration, mechanical breakdown and rust.
• Mold, Pollution and Contamination: Typically excluded or heavily limited.
• Earth Movement: Settling, cracking, shrinkage and earthquake, unless added by endorsement.
• Flood: Often excluded or sublimited and may need to be added separately.
• Employee Theft: Theft by your own employees is generally excluded.
• Contractor’s Tools and Equipment: Requires Inland Marine or Contractor’s Equipment coverage.
• Liability Claims: Injuries or damage to third parties require General Liability Insurance.

How Much Does Builder’s Risk Insurance Cost?

The cost of builder’s risk insurance is usually based on a percentage of the project’s total completed value, including materials and labor but excluding land. As a general range, residential and renovation projects often pay around 1% to 5% of the construction budget, while large non-combustible commercial projects are typically rated well below 1%. Your builder’s risk insurance rate depends on:

• Project Value: The total completed value of the building.
• Construction Type: Wood frame projects cost more to insure than masonry, concrete or steel.
• Location and Weather Exposure: Coastal wind, hail, wildfire and crime exposure affect pricing.
• Project Length: Policies are written for 3, 6, 9 or 12 months, or the full project term.
• Site Security and Deductible: Fencing, lighting, cameras and your deductible choice can lower your premium.

Who Needs Builder’s Risk Insurance?

Builder’s Risk Insurance is essential for:

• Homeowners: Building a custom home or completing a major remodel, renovation or addition.
• Property Owners and Investors: Developing residential or commercial property.
• General Contractors and Home Builders: Responsible for insuring the project under their construction contract.
• Real Estate Developers: Building spec homes, multifamily or mixed-use projects.
• Construction Lenders: Commonly listed as loss payee or mortgagee on the policy.
• Subcontractors, Architects and Engineers: Parties with a financial interest who can be added as additional insureds.

Whether you’re building from the ground up or renovating an existing property, if you have a financial stake in a building under construction, builder’s risk insurance should be part of your project plan.

Builder’s Risk vs. General Liability Insurance

These two policies work together, and most construction projects need both. Builder’s risk insurance covers physical damage to the project itself, such as the structure and materials, and lasts only for the length of the project. General liability insurance covers claims from third parties for bodily injury or property damage caused by your operations and is usually renewed every year.

Why Choose Inszone Insurance for Your Builder’s Risk Insurance Needs?

Construction Insurance Expertise

At Inszone Insurance, we understand construction contracts, lender requirements and job site exposures. Our experienced agents help you select the right builder’s risk coverage so your policy matches how your project is actually built.

Customized Insurance Solutions

From a single-family remodel to a multi-million-dollar commercial build, we tailor limits, policy terms, deductibles and endorsements to your project, ensuring comprehensive protection without unnecessary coverage.

Access to Top Insurance Carriers

As an independent agency, we have established relationships with leading insurance carriers that write builder’s risk policies. This allows us to compare multiple options on your behalf and provide the best coverage at competitive rates.

Exceptional Customer Service

Our commitment to outstanding service means we’re here for you every step of the way, from your first quote to certificates of insurance, policy extensions when your schedule changes, and claims assistance through completion.

Additional Coverages and Endorsements to Consider

• General Liability Insurance: Covers third-party bodily injury and property damage claims arising from your work.
• Workers’ Compensation Insurance: Pays medical costs and lost wages for employees injured on the job site.
• Inland Marine / Contractor’s Equipment Insurance: Protects the tools and equipment that builder’s risk excludes.
• Excess Liability / Umbrella Insurance: Adds the higher liability limits often required on larger contracts.
• Contractor’s Pollution Liability: Covers pollution and environmental claims tied to your operations.
• Surety Bonds: Bid, performance and payment bonds required on many public and private projects.

Frequently Asked Questions

Q: What is builder’s risk insurance?

A: Builder’s risk insurance, also called course of construction insurance, is a temporary property policy that covers a building while it is being built or renovated, along with the materials, fixtures and equipment that will become part of it. It typically protects against fire, theft, vandalism, wind, hail, lightning and other covered perils until the project is complete.

Q: What does builder’s risk insurance cover?

A: Most builder’s risk policies cover the structure under construction, building materials on site, in transit and in temporary off-site storage, and temporary structures such as scaffolding, fencing and forms. Optional extensions can add soft costs, delay in completion, debris removal, ordinance or law coverage and expediting expenses.

Q: What is not covered by builder’s risk insurance?

A: Common exclusions include faulty workmanship, design or materials, normal wear and tear, mold, employee theft, earth movement and the contractor’s own tools and equipment. Flood and earthquake are often excluded or sublimited and may need to be added. Liability for injuries or third-party property damage requires general liability insurance.

Q: How much does builder’s risk insurance cost?

A: Builder’s risk premiums are usually calculated as a percentage of the project’s total completed value. Smaller residential and renovation projects commonly cost about 1% to 5% of the construction budget, while large non-combustible commercial projects can be rated well below 1%. Construction type, location, project length, site security and deductible all affect the price.

Q: Who pays for builder’s risk insurance, the owner or the contractor?

A: Either the property owner or the general contractor can buy builder’s risk insurance, and the construction contract should state who is responsible. Under many standard contracts the owner buys the policy, but contractors often purchase it and include the cost in their bid. Lenders and subcontractors can be added to the policy.

Q: Do homeowners need builder’s risk insurance?

A: Yes, homeowners building a new home or completing a major remodel or addition often need builder’s risk insurance. A standard homeowners policy may not cover a home under construction or major renovation work, and many lenders require builder’s risk coverage before releasing construction loan funds.

Q: Does builder’s risk insurance cover renovations and remodels?

A: Yes. Builder’s risk insurance can be written for renovations, remodels and additions, not just ground-up new construction. For renovation projects, the policy typically covers the new work and materials, and coverage for the existing structure can often be added by endorsement.

Q: How long does a builder’s risk policy last?

A: Builder’s risk policies are usually written for the expected length of the project, commonly 3, 6, 9 or 12 months, and can often be extended if construction runs late. Coverage typically ends when the project is completed, occupied or accepted by the owner, whichever happens first.

Q: Does builder’s risk insurance cover theft of materials?

A: Most builder’s risk policies cover theft of building materials intended to become part of the structure, often with a sublimit and site security requirements such as fencing or locked storage. Theft of contractor tools and equipment generally requires Inland Marine or Contractor’s Equipment coverage.

Q: What is the difference between builder’s risk and general liability insurance?

A: Builder’s risk insurance covers physical damage to the project itself, such as the structure and materials. General liability insurance covers claims from third parties for bodily injury or property damage caused by your operations. Most construction projects need both.

Q: Is builder’s risk insurance required?

A: Builder’s risk insurance is generally not required by state law, but it is often required by construction lenders and construction contracts. Without it, the owner or contractor may have to pay out of pocket to rebuild after a fire, storm or theft.

For personalized assistance or to discuss your specific project, contact our experienced agents at Inszone Insurance. We’re here to help you find the right builder’s risk coverage to protect your investment from groundbreaking to completion.