Builders Risk Insurance Explained

Builders risk insurance is a property insurance policy that covers a structure during construction or major renovation. It pays for repairs or replacement if the structure is damaged by fire, theft, vandalism, falling objects, lightning, hail, or wind during the construction term.

Builders risk is also called course of construction insurance. It is a property policy, not a liability policy. It covers the building and the materials on site, not bodily injury or contractor negligence (those are general liability coverage).

Standard builders risk policies cover fire, lightning, theft, vandalism, falling objects, wind, hail, and weather damage to the structure under construction and to building materials stored on or near the site.

Standard policies do not cover earthquake, flood, employee theft, professional design errors, or normal wear and tear. Earthquake and flood require separate riders. Professional design errors fall under the architect or engineer's errors and omissions policy.

Most policies cover building materials in transit, in temporary off-site storage, and on the construction site. Coverage typically continues until substantial completion, which is also the point where the owner's standard homeowner policy begins to cover the structure.

Builders risk premium is typically 1 to 4% of the construction value, paid as a single premium at policy bind. A $300,000 new-home construction project carries a premium of $3,000 to $12,000 for the full construction term.

Pricing varies with location (coastal and wildfire markets are higher), construction type (frame vs masonry), term length (longer projects cost more), and deductible. Typical deductibles run $1,000 to $5,000 per occurrence.

Most insurers price the policy on the completed value, with the premium amortized across the construction term. Mid-construction value upgrades require a policy endorsement and an additional premium.

Most contractors require a builders risk policy on jobs over $50,000. Most lenders on new-home construction require a policy as a condition of the construction loan. Homeowners doing a major remodel that exposes the structure (open walls, removed roof sections) should also carry builders risk because standard homeowner policies often exclude active construction.

For smaller remodels under $50,000 where the structure stays substantially intact, the existing homeowner policy plus the contractor's general liability often suffices. Always check with your homeowner insurer before assuming coverage.

Either the contractor or the homeowner can hold the policy. Common practice varies by project type:

For new-home construction, the builder often holds the policy and the lender is named as a loss payee. The lender requires this to protect the construction loan.

For remodels and additions, the homeowner often holds the policy because the home is already owned and insured. The contractor is named as an additional insured.

Whoever holds the policy controls the claim. The other party should always be named as an additional insured or loss payee depending on their financial interest.

A builders risk claim is filed by the policy holder when damage occurs. The insurer dispatches an adjuster to assess damage. Approved claims pay for repair or replacement of the damaged work or materials, minus the deductible.

Claim timelines vary. Small claims (theft of materials, minor wind damage) often resolve in 2 to 6 weeks. Large claims (fire damage to a partially built home) can run 3 to 9 months because rebuilding requires re-permit and re-inspect.

Document every claim with photos, police reports (for theft and vandalism), and contractor invoices. ContractShield contracts log on-site events with photos and timestamps, which streamlines builders risk claims.

Builders risk coverage typically ends at substantial completion, which is the point where the structure is fit for its intended use. After substantial completion, the standard homeowner policy or commercial property policy takes over.

Some policies extend coverage for a short period (30 to 90 days) past substantial completion to cover punch list work. Check the policy language. The transition from builders risk to permanent property insurance should not have a gap.

ContractShield project setup includes an insurance checklist that flags whether builders risk is required based on project value, scope, and lender presence. The platform tracks insurance certificates inside the project workspace, with renewal alerts as the project term extends.

The platform does not sell insurance. It surfaces the requirement and tracks compliance so neither side is exposed at claim time. Contractors who carry a current builders risk policy across all active projects show that status on every bid.