Builders Risk Insurance
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A $4 million custom home halfway through framing. A historic downtown office building getting a full gut renovation. Both projects share the same vulnerability: one severe storm, one fire, one act of vandalism, and months of work and hundreds of thousands of dollars can vanish overnight. Standard commercial property policies and general liability coverage don't protect structures under construction. That gap is exactly where builders risk insurance fills in, covering the physical structure, materials, and often the financial losses tied to project delays. Whether you're breaking ground on a new build or tearing into a major renovation, understanding course-of-construction coverage isn't optional - it's essential. The stakes are too high, and the policy details too nuanced, to treat this as an afterthought. Getting it right means knowing what's covered, what's excluded, who holds the policy, and how to avoid the mistakes that leave business owners exposed at the worst possible moment.
Understanding Builders Risk and Course-of-Construction Fundamentals
SBuilders risk insurance is a specialized property policy designed to protect a building while it's being constructed or substantially renovated. It covers the structure itself, along with materials and supplies on-site, against risks like fire, wind, theft, and certain water damage. The policy is temporary by design - it exists only for the duration of the project and expires once the building is occupied or the work is complete.
This type of coverage is sometimes called "course of construction" insurance, and the two terms are essentially interchangeable. The key distinction from a standard property policy is timing: builders risk protects a structure that doesn't yet exist in its final form, while property insurance covers a completed building.
What Builders Risk Insurance Covers
A standard builders risk policy covers the physical structure under construction, including permanent fixtures, foundations, and attached equipment. It also covers building materials and supplies stored on-site or in transit to the job site, up to specified limits. Most policies are written on an "all-risk" or "open peril" basis, meaning they cover any cause of loss not specifically excluded. That's an important distinction from "named peril" policies, which only cover risks explicitly listed.
Temporary structures like scaffolding and construction trailers may be covered under some policies, though this varies by insurer. The same goes for landscaping, which is often excluded unless specifically endorsed.
The Difference Between Ground-Up and Renovation Policies
New construction and renovation projects carry different risk profiles, and insurers price them accordingly. Ground-up builds involve insuring a structure that gains value progressively - from an empty lot to a finished building. Renovation projects are trickier because there's an existing structure with established value, and the work itself can introduce new risks like structural instability or fire from demolition.
Renovation policies carry higher insurance price levels at around 65 cents per $100,000 in coverage, compared to new construction at roughly 30 cents per $100,000. That difference reflects the added complexity of insuring a partially occupied or aging structure during active work.
Who Should Hold the Policy: Owners vs. Contractors
This is one of the most common sources of confusion - and disputes. Either the property owner or the general contractor can purchase the policy. In practice, the answer often depends on the contract terms and who has the most at stake.
Owner-controlled policies give the property owner direct control over coverage limits, endorsements, and claims. Contractor-controlled policies shift that responsibility to the builder, which can simplify things on multi-phase projects. The critical point is that whoever holds the policy should be clearly stated in the construction contract, and all parties with an insurable interest - owner, GC, and major subcontractors - should be named as additional insureds.
By: Tod O’Dowd, CIC, CAPI
President of Avery Insurance Agency
Core Coverage Components and Common Exclusions
Protection for Materials, Supplies, and Equipment
Builders risk policies typically cover materials and supplies that will become a permanent part of the structure. Lumber sitting on-site, HVAC units waiting for installation, custom cabinetry in transit from a supplier - all of these fall under coverage. Most policies also extend limited protection to materials stored off-site at a secondary location, though with lower sublimits.
One area that trips people up: contractor-owned tools and heavy equipment like cranes and excavators are usually not covered under a builders risk policy. Those need a separate inland marine or equipment floater policy.
Soft Costs and Delay in Completion Endorsements
Here's where the real financial exposure often hides. If a covered loss delays your project by three months, the physical damage to the structure is only part of the hit. You're also paying extended loan interest, additional architectural and engineering fees, permit renewals, and potentially lost rental income.
Soft cost and delay-in-completion endorsements cover these indirect financial losses. They're not included in a base policy - you have to add them. For a business building a $3 million mixed-use property, a six-month delay could easily generate $200,000 or more in soft costs alone. Agencies like Avery Insurance Agency, which takes a consultative approach to identifying these kinds of hidden vulnerabilities, can help you determine whether the endorsement cost is justified for your specific project.
Standard Exclusions: Design Flaws and Employee Theft
Every builders risk policy has exclusions, and two of the most significant are faulty design and employee dishonesty. If a structural engineer miscalculates a load-bearing wall and it collapses, the resulting damage typically isn't covered. The logic is that construction defects are a workmanship issue, not a fortuitous loss.
Employee theft is another common exclusion. If a subcontractor's crew walks off with $50,000 in copper wiring, your builders risk policy likely won't pay. You'd need a separate crime or fidelity bond to address that exposure. Flood and earthquake are also excluded from standard policies and require separate endorsements or standalone coverage.
Determining Policy Duration and Coverage Limits
Establishing the Total Completed Value
Builders risk policies are typically written for the total completed value of the project - not the current value at any given phase. This means if you're building a $5 million structure, you insure it for $5 million from day one, even though only the foundation exists in month two.
Premiums for builders risk insurance typically range from 1% to 5% of the total project budget, depending on factors like location, construction type, and the specific perils covered. Getting this number right matters. Underinsuring a project can trigger coinsurance penalties at claim time, leaving you with a fraction of what you expected.
Triggering Events for Coverage Termination
A builders risk policy doesn't last forever - and it shouldn't. Coverage typically ends when the earliest of these events occurs: the project is completed, the building is occupied, the policy expiration date arrives, or the owner accepts the structure. Some policies also terminate if the building is put to its intended use, even partially.
This creates a real gap risk. If your project runs over schedule and the policy expires, you're uninsured unless you've arranged an extension. Policy extensions are available but must be requested before expiration, and they come with additional premium. Planning for realistic timelines - not optimistic ones - is critical.
Risk Management Strategies for Construction Sites
Mitigating Theft and Vandalism Risks
Construction sites are magnets for theft. Copper, lumber, appliances, and power tools disappear from job sites every day, and the losses add up fast. Practical steps make a real difference: perimeter fencing, motion-activated lighting, locked storage containers for high-value materials, and security cameras with remote monitoring.
Some insurers offer premium credits for sites with documented security protocols. Keeping a detailed inventory of materials on-site, with photos and receipts, also speeds up the claims process if something does go missing.
Natural Disaster and Weather Preparedness
For projects in hurricane zones, tornado alleys, or wildfire-prone areas, weather preparedness isn't just smart - it directly affects your insurability and premium. Securing loose materials before storms, maintaining proper drainage to prevent water intrusion, and having a documented storm preparedness plan are baseline expectations from most carriers.
The market has shown some recent flexibility here. The U.S. builders risk market is
at a softer turning point, with insurers being more flexible and terms relaxing. That said, projects in catastrophe-prone zones still face tighter underwriting. Rate decreases of
5 to 7% have been reported in non-CAT zones, but don't expect the same relief if you're building on the Gulf Coast.
Several variables determine what you'll pay. Here's a quick comparison of how different project characteristics affect pricing:
| Factor | Lower Premium | Higher Premium |
|---|---|---|
| Construction type | Fire-resistive (steel/concrete) | Frame/wood construction |
| Location | Inland, low-crime area | Coastal, high-crime area |
| Project type | New ground-up build | Renovation of existing structure |
| Security measures | Fenced, cameras, guards | Open site, no monitoring |
| Policy duration | 6-12 months | 18+ months |
| Deductible chosen | Higher deductible | Lower deductible |
Project value is the biggest driver, but these secondary factors can swing your premium significantly. A $2 million wood-frame home on the Florida coast will cost substantially more to insure than a $2 million concrete commercial building in Ohio.
Interestingly,
71% of modular projects in 2025 required specialized coverage, reflecting how newer construction methods are creating new insurance considerations that standard policies don't always address.
Filing a builders risk claim during active construction is stressful, and the process differs from a standard property claim in important ways. The first step is always documenting the damage immediately - photos, videos, and written descriptions before any cleanup or temporary repairs begin. Notify your insurance carrier within 24 to 48 hours, even if the full extent of the damage isn't yet clear.
Your insurer will send an adjuster to assess the loss. Having organized records - original construction contracts, change orders, material invoices, and progress photos from before the loss - dramatically speeds up the process and strengthens your claim. Without this documentation, disputes over pre-loss versus post-loss conditions become common and costly.
One mistake I've seen repeatedly: contractors making permanent repairs before the adjuster inspects the site. Temporary measures to prevent further damage are fine and expected, but full repairs before documentation can jeopardize your payout. Keep receipts for all temporary protective measures, as those costs are typically reimbursable.
Working with an agency that understands construction claims makes a measurable difference. Avery Insurance Agency, with over 125 years of experience advocating for clients, can help coordinate between your contractor, the adjuster, and the carrier to keep the process moving and protect your interests.
Before You Break Ground
Builders risk coverage for construction projects is one of those insurance products that seems straightforward until something goes wrong. The difference between a policy that actually protects you and one that leaves gaps often comes down to the details: soft cost endorsements, accurate completed values, proper named insureds, and realistic project timelines.
Don't wait until the foundation is poured to start thinking about this. Get your coverage in place before the first shovel hits dirt, and work with an advisor who will ask the hard questions about your specific exposures. If you're planning a ground-up build or a major renovation, reach out to Avery Insurance Agency for a consultative review of your project risks - because the best time to find a coverage gap is before you need to file a claim.
Frequently Asked Questions
Does my general contractor's insurance cover the building under construction? A contractor's general liability policy covers third-party injuries and property damage they cause - not the structure itself. You need a separate builders risk policy for that.
Can I get builders risk insurance for a residential renovation? Yes. Any substantial renovation project - kitchen remodels, additions, full gut rehabs - can and often should be covered by a builders risk policy, especially if the project value exceeds $50,000.
What happens if my project goes over schedule? Your policy has a set expiration date. If construction runs long, you'll need to request an extension before the policy lapses, which comes with an additional premium charge.
Is flood damage covered under builders risk? No. Flood is a standard exclusion. You'll need a separate flood policy or a specific flood endorsement, particularly for projects in FEMA-designated flood zones.
How quickly can I get a builders risk policy?
Most policies can be bound within a few days to two weeks, depending on the project size and complexity. Large commercial projects with unusual risks may take longer due to underwriting review.
ABOUT THE AUTHOR:
Tod O’Dowd, CIC, CAPI
I'm the President of Avery Insurance Agency, a family-owned independent agency serving individuals and businesses across New England and in 40+ states. With a hands-on, consultative approach to personal and commercial risk, I help clients — from high-net-worth homeowners and contractors to restaurant owners and property managers — find the right coverage without the guesswork of working with a single-carrier agent.
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