Construction season is in full swing, and for contractors, general contractors, and developers across the region, that means active job sites, significant material investments, and real financial exposure at every stage of the build. One of the most important — and most misunderstood — types of coverage for anyone in the construction business is Builder’s Risk Insurance. If you’re managing an active project and don’t have a Builder’s Risk policy in place, you could be one fire, one storm, or one theft away from a catastrophic financial loss. Here’s everything you need to know.
What Is Builder’s Risk Insurance?
Builder’s Risk Insurance (also called Course of Construction Insurance) is a specialized type of property insurance that covers a building or structure while it is under construction. It is not a permanent property policy — it exists specifically for the construction period, from groundbreaking to project completion. The policy can be purchased by the property owner, the general contractor, or the developer, and it typically covers the structure itself, materials on-site, and materials in transit or in temporary storage.
What Does Builder’s Risk Insurance Cover?
- Fire, lightning, and explosion damage
- Windstorm, hail, and severe weather damage
- Vandalism and malicious mischief
- Theft of materials and equipment on-site
- Collapse during construction
- Water damage from rain or accidental discharge (depending on policy)
- Damage during transit to or from the job site (often included)
- Temporary structures like scaffolding, fencing, and construction trailers (with appropriate endorsements)
What Is Typically NOT Covered?
- Faulty design, workmanship, or materials (this is often covered by professional liability or a warranty)
- Employee theft (this requires a Crime or Employee Dishonesty endorsement)
- Earthquake or flood (unless specifically endorsed)
- Damage to tools and equipment (those require Inland Marine / Equipment Floater coverage)
- Completed portions of the project after the certificate of occupancy has been issued
- Intentional damage or contractor negligence
How Is Coverage Calculated?
Builder’s Risk policies are typically written at the completed value of the project — not the current value at the time of the loss. This ensures that as the project progresses and more materials and labor are invested, the full completed value of the structure is always covered. Policies are usually written for a 3, 6, or 12-month term and can often be extended if a project runs over schedule. Premiums are typically based on the completed value of the project and the type of construction (frame, masonry, steel, etc.).
Who Should Carry Builder’s Risk Insurance?
The question of who is responsible for purchasing a Builder’s Risk policy should be spelled out in the construction contract before a project begins. In practice, either the property owner or the general contractor typically carries the policy, with subcontractors and other parties added as additional insureds. Regardless of who purchases it, every party with a financial interest in the project should confirm that a valid Builder’s Risk policy is in place before work begins. Lenders will often require proof of Builder’s Risk coverage before releasing construction financing.
Builder’s Risk vs. General Liability: Understanding the Difference
This is one of the most common points of confusion we encounter. General Liability insurance covers bodily injury or property damage you cause to third parties. Builder’s Risk covers the project itself — the physical structure and materials. You need both. A General Liability policy will not pay to replace stolen framing lumber or repair fire damage to a half-built home. Only a Builder’s Risk policy does that. Together, these two coverages form the foundation of a well-protected construction operation.
Getting the Right Builder’s Risk Policy
Not all Builder’s Risk policies are created equal. The coverage terms, exclusions, and limits vary significantly between carriers, and it’s important to work with an agent who understands construction. At Contractors Insurance Agency, we specialize in coverage for general contractors, specialty trades, and construction firms. We’ll help you structure a Builder’s Risk policy that matches your project scope, timeline, and contract requirements — and we’ll make sure there are no coverage gaps that could leave you exposed mid-build. If you have an active project — or one starting soon — contact us today for a Builder’s Risk quote. Don’t let the busy season leave you without the protection your project deserves.