Builder’s Risk Insurance: What It Covers and Why You May Need It

Builder’s Risk Insurance: What It Covers and Why You May Need It

If you’re involved in construction—whether you’re a contractor, property owner, or developer—you’ve likely heard of Builder’s Risk Insurance. But what exactly is it, what does it cover, and why is it so important? Understanding this specialized insurance can protect your project, your investment, and your peace of mind.

Let’s break down the essentials of Builder’s Risk Insurance and help you decide if you need it.

What Is Builder’s Risk Insurance?

Builder’s Risk Insurance, sometimes called Course of Construction Insurance, is a type of property insurance that covers buildings under construction, renovation, or repair. Unlike traditional property insurance, which protects completed buildings, builder’s risk focuses specifically on the structure during the construction phase.

What Does Builder’s Risk Insurance Cover?

Builder’s Risk Insurance typically covers:

1. Physical Damage to the Structure

This includes damage caused by:

• Fire

• Windstorms and hail

• Lightning

• Theft or vandalism

• Explosions

• Water damage (not from flooding but from plumbing or accidental discharge)

2. Materials, Fixtures, and Equipment

Coverage usually extends to materials, fixtures, and equipment that are on-site, in transit, or temporarily stored off-site waiting to be installed.

3. Soft Costs

Some policies include coverage for additional expenses related to construction delays caused by a covered loss, such as:

• Extended loan interest

• Additional architect or engineering fees

• Legal fees

What Isn’t Covered?

Builder’s Risk Insurance generally does not cover:

• Employee injuries (covered by workers’ comp)

• Contractor tools and equipment

• Flood and earthquake damage (often require separate policies)

• Faulty workmanship or design errors

• Normal wear and tear

Who Needs Builder’s Risk Insurance?

Property Owners

If you’re financing or managing a construction or renovation project, builder’s risk protects your investment against unexpected damages during construction.

Contractors and Subcontractors

While you may have general liability insurance, builder’s risk specifically covers the physical structure and materials, protecting your work on the job site.

Lenders

Many lenders require builder’s risk insurance to safeguard their financial interest in the project.

Why Is Builder’s Risk Insurance Important?

Construction sites are vulnerable. Weather, accidents, theft, and unforeseen events can cause costly damage or delays. Without builder’s risk coverage, you might face huge out-of-pocket expenses to repair or replace damaged property.

Having this insurance helps:

• Reduce financial risk

• Keep your project on schedule

• Meet lender or contract requirements

• Provide peace of mind

How Much Does Builder’s Risk Insurance Cost?

Premiums vary based on:

• Project size and value

• Location and risk factors (e.g., weather, crime rates)

• Project duration

• Coverage limits and deductibles

Builder’s risk insurance is generally affordable relative to the protection it offers.

Tips for Choosing Builder’s Risk Insurance

• Understand your project’s unique risks

• Compare quotes from multiple insurers

• Confirm coverage limits and exclusions

• Ask about soft cost coverage

• Work with an experienced insurance agent

Final Thoughts

Builder’s Risk Insurance is a vital safeguard for anyone involved in construction. By covering physical damage and other costs during your project, it helps ensure your investment stays protected and your work stays on track.

If you’re starting a new build or renovation, don’t skip this coverage—it could save you from major financial headaches down the line.