Builders Risk Insurance for Contractors
Builders risk insurance covers the structure, materials, and supplies during construction. Learn what it costs, who buys it, common exclusions, and how to compare quotes.
Key Takeaways
Builders risk is temporary property insurance that covers the structure, materials, and supplies during construction. Premiums are generally based on total completed project value.
- The construction contract determines who buys the policy and which parties are named as insureds
- Common exclusions include flood, earthquake, faulty workmanship, contractor tools, and vehicles
- Basic policies cover only hard costs; soft costs and delay coverage require endorsements
- Premiums are calculated as a percentage of total project value; one published brokerage benchmark cites 1% to 5%, but your quote will reflect your specific project details
What builders risk insurance covers during construction
Builders risk insurance is temporary property coverage for a building or structure while it is under construction, renovation, or remodeling. The policy protects the project itself and the materials going into it, not your ongoing business operations.
It is often called course-of-construction insurance. The policy helps protect construction projects from property damage caused by perils such as fire, lightning, hail, explosion, theft, vandalism, and certain weather events.
The policy is project-specific. It starts around the construction contract or project start date and ends when the project is completed, the building is occupied, or the policy expires, depending on the wording.
What property is covered
The main covered property is the structure under construction and the materials, supplies, and equipment that will become part of that structure. Materials on site, in transit, and at temporary storage locations can also be covered, though transit and off-site storage may require endorsements or higher sublimits.
Do not read "equipment" too broadly here. Builders risk covers items becoming part of the building. Contractor-owned tools, mobile equipment, and vehicles usually need separate coverage. Most builders risk policies exclude contractor's equipment unless it is reported in the policy values. Contractors can report it in values or buy a separate tools and equipment floater.
How an installation floater relates to builders risk
An installation floater is inland marine coverage on property being installed by a contractor. IRMI describes it as a specialized type of builders risk coverage often written on the same form. Trade contractors installing HVAC units, electrical systems, or fixtures may find an installation floater more practical than a full builders risk policy when they do not control the entire project.
Builders risk protects the project itself and the materials going into it. Your general liability policy handles third-party injury and property damage claims, which are separate exposures.
Who buys the policy and who is insured
The construction contract determines who buys builders risk. The owner often purchases it because they hold the primary financial interest in the project. But a contract can require the general contractor to secure the policy and list the owner, subcontractors, and lender as additional insureds.
When the general contractor (GC) secures the policy, the GC commonly acts as primary insured and names the building owner, subcontractors, and other parties as additional insureds.
AIA contract requirements for insured parties
Under AIA A101-2017 Exhibit A, builders risk insurance must include the interests of the owner, contractor, subcontractor, and sub-subcontractors in the project as insureds. The owner remains responsible for procuring the required property insurance, paying premiums and deductibles, and adjusting claims with insurers.
The owner must also provide a copy of the builders risk policy to the contractor upon written request.
Why a certificate alone does not prove you are covered
A certificate of insurance shows evidence that a policy exists. It does not prove you are a named insured or additional insured on that policy. Contractors should ask for the actual policy or endorsement wording when the contract assigns builders risk obligations.
Common exclusions that leave contractors exposed
Builders risk is first-party property coverage for the project. It does not replace general liability, workers compensation, commercial auto, or professional liability. And even within its scope, several common exclusions apply.
Flood, earthquake, and wind zone exclusions
Standard builders risk policies commonly exclude flood, earthquake, and sometimes wind in coastal zones unless extensions are added. Depending on project location, these perils may need separate endorsements or standalone policies.
Faulty workmanship and the ensuing-damage distinction
Builders risk policies often exclude faulty design, materials, and workmanship. But many policies include an ensuing-damage provision. For example, if faulty electrical materials cause a fire, the policy may not cover replacing the faulty materials but may cover repair or replacement of other property damaged by the resulting fire.
The distinction matters. The cost to redo your own defective work is generally not covered. Damage that defective work causes to other covered property may be covered, subject to policy terms.
Contractor tools, vehicles, and employee injuries
Contractor-owned tools, mobile equipment, and vehicles are usually excluded. Builders risk may cover tools and equipment while in transit as project materials, but it does not cover the vehicle transporting them. Business driving needs commercial auto coverage.
Employee injuries and workplace accident claims belong to workers compensation and employer liability coverage. Third-party injury and property damage claims belong to general liability.
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Soft costs, delay coverage, and endorsements worth asking about
A basic builders risk policy covers hard costs: the physical structure, materials, labor value, and tangible assets tied to the project. But when a covered loss delays the project, indirect expenses pile up. Those indirect expenses are called soft costs, and they are not covered unless the policy includes a soft-cost endorsement.
Builders risk exposures generally fall into three categories: hard costs, soft costs, and business interruption or loss of rent. Streamlined policies typically cover only hard costs.
What soft costs look like
- Additional construction loan interest from extended project timelines
- Re-inspection fees and extended permit costs
- Advertising for a new opening date on commercial projects
- Architects and engineers fees for revised plans after a loss
- Extended insurance premiums and real estate taxes during the delay
- Extended general conditions such as temporary utilities and site security
Loss of rents and business interruption
For commercial projects like retail centers, apartment buildings, or office space, a construction delay may prevent the owner from leasing space to tenants. Loss of rents coverage addresses lost revenue from rents and leases that would have been earned absent the delay.
Contractors building tenant improvements, restaurants, or retail spaces should ask whether the owner needs this endorsement and whether the contract assigns any of that risk to the contractor.
| Endorsement or extension | What it covers | When to ask about it |
|---|---|---|
| Soft costs | Indirect expenses from project delays after a covered loss: loan interest, permits, advertising, extended general conditions | Commercial projects with financing, permits, or scheduled opening dates |
| Delay in completion | Additional costs incurred because the project cannot be completed on schedule after a covered loss | Projects with contractual completion deadlines or liquidated damages clauses |
| Loss of rents | Lost rental income the owner would have earned if the project had been completed on time | Apartment, retail, office, or any project with pre-leased tenants |
| Transit and off-site storage | Materials damaged while being transported or stored away from the project site | Projects in dense areas with limited on-site storage, or when materials are fabricated off-site |
| Flood or earthquake | Physical loss from flood or earth movement, commonly excluded from standard policies | Projects in flood zones, coastal areas, or seismically active regions |
The endorsements you need depend on your project type, your role in the contract, and whether the project has delay-sensitive costs. Use the tool below to check which coverage scope and endorsements to ask about.
Builders Risk Coverage Check
Check project coverage points before you request builders risk terms.
Step 1
What kind of project is this?
How carriers price a builders risk policy
Builders risk premiums are based on the project, not the contractor's annual revenue or payroll. The primary rating basis is total completed project value. Carriers then adjust for project type, construction materials, location, duration, deductible, and coverage extensions.
The Hartford states that builders risk cost depends on construction materials, type of project, policy details, coverage amounts, and limits. Coverage limits should generally equal the anticipated cost of construction.
General market rate context
A public brokerage guide from Liberty Insurance cites a general range of 1% to 5% of total construction project value for builders risk rates, with deductibles typically from $500 to $5,000. This is general context from a brokerage guide, not a filed rate or a quote for your project.
The same source explains that cost is calculated from total completed value, focusing on hard costs such as materials, labor, equipment rentals, foundation work, and temporary structures. Land value is excluded because land itself is not destroyed.
Details that increase or decrease the premium
- Total completed project value and policy limit (higher value means higher premium)
- Project type: new construction, renovation, remodeling, tenant improvement, or addition
- Construction materials: frame, masonry, steel, or fire-resistive construction
- Location: weather exposure, flood zone, earthquake zone, coastal or wildfire risk
- Project duration and whether extensions may be needed
- Deductible level and catastrophe deductibles
- Coverage extensions: soft costs, transit, off-site storage, flood, earthquake
- Security, fencing, lighting, and fire protection on site
- Prior loss history and contractor experience
Enter your project value and type below to see a ballpark premium estimate. The result is general context based on the 1% to 5% range, not a quote. Your actual premium depends on location, duration, construction type, and coverage extensions.
Builders Risk Cost Estimator
Use project value and project details to see a rough builders risk premium benchmark before you request quotes.
Use completed project cost. Exclude land value.
Carriers ask because renovation and new work can differ.
Add covered interest, permits, taxes, or design fees if needed.
Materials stored away from the job or being moved.
Assumptions
- Uses a broad public builders risk benchmark tied to project value. Actual quotes depend on the project and policy terms.
- Completed value should exclude land and include hard costs such as labor and materials.
- Soft costs and delay coverage usually require specific policy wording.
- Quotes also consider location, duration, construction type, security, and deductible.
- Builders risk does not replace liability, auto, workers compensation, or tools coverage.
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What to verify in your construction contract before binding
Before you bind builders risk or rely on an owner-purchased policy, verify these items in the construction contract and the policy itself. IRMI commentary on AIA requirements states that the property insurance must be on a builders risk all-risks, completed value, or equivalent form.
Sonoma County's contract insurance reference guide describes builders risk as coverage to insure owners and contractors against damage to structures in the course of construction. Public contracts often list specific requirements for limits, named insureds, and coverage scope.
Builders risk contract review checklist
Verify each item before binding coverage or relying on an owner-purchased policy.
Policy limit matches completed project value
The limit should equal the full anticipated cost of construction, not only the amount spent to date.
All parties with financial interest are named as insureds
Owner, general contractor, subcontractors, lender, and design professionals where required by contract.
Deductible responsibility is assigned
Confirm who pays the deductible and who absorbs uninsured portions of a loss.
Coverage start and end dates match the project schedule
Check when coverage begins, when it ends, and what triggers termination: occupancy, substantial completion, final payment, or policy expiration.
Transit and off-site storage are included or endorsed
If materials are stored away from the site or transported between locations, confirm sublimits are adequate.
Soft costs and delay endorsements are included if needed
Commercial projects with financing, pre-leased tenants, or contractual deadlines may need soft-cost or delay-in-completion coverage.
Transition to permanent property insurance is addressed
Confirm when builders risk ends and when permanent property coverage must begin. A gap between the two leaves the completed structure uninsured.
Actual policy wording is available, not only a certificate
Ask for the policy or endorsement wording when the contract assigns builders risk obligations. A certificate alone does not prove your insured status.
Use the checklist generator below to create a printable version with your project name and role pre-filled. Bring it to a contract review meeting or send it to your insurance contact.
Builders Risk Contract Checklist
Create a project checklist for reviewing builders risk contract and policy details before coverage is bound.
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Next steps
- Compare the contract insurance section with the policy and endorsement wording before binding coverage.
- Ask the project owner or general contractor for written clarification when duties are unclear.
- Send unresolved coverage questions to your licensed insurance contact before work begins.
- Keep the completed checklist with the contract, policy, endorsements, and certificate records.
How builders risk fits beside your other contractor policies
Builders risk handles one specific exposure: physical loss to the project during construction. It does not replace the other policies contractors carry. Here is how it fits beside them.
| Coverage | What it protects | How it differs from builders risk |
|---|---|---|
| General liability | Third-party bodily injury and property damage claims | Builders risk covers first-party project property loss, not third-party claims |
| Workers compensation | Employee injuries and occupational illness | Builders risk does not cover people, only project property |
| Commercial auto | Vehicles used for business, including liability and physical damage | Builders risk excludes vehicles even when transporting project materials |
| Tools and equipment (inland marine) | Contractor-owned tools, machinery, and mobile equipment | Builders risk covers materials becoming part of the project, not contractor-owned tools |
| Installation floater | Property being installed by a trade contractor | A specialized form of builders risk for trade contractors installing specific components |
| Performance or payment bond | Contract performance and payment obligations | A bond is not insurance for physical damage; it guarantees contract obligations |
When an installation floater makes more sense
Trade contractors installing HVAC units, electrical systems, plumbing fixtures, or other components may not need a full builders risk policy. An installation floater covers the contractor's property while it is being installed and is often written on the same form as builders risk. It is especially useful when the general contractor or owner already carries the project-wide builders risk policy and the trade contractor needs coverage for their own materials and installed work.
Your tools and equipment coverage handles your owned tools and machinery. The installation floater handles the property you are installing. Builders risk handles the overall project. Each covers a different piece of the construction exposure.
Compare builders risk quotes for your project
Builders risk is project-specific, so your quote depends on the details: project value, type, location, duration, and coverage extensions. One quote request lets you compare available options from carriers that write construction property coverage.
You can get free quotes online in minutes. Enter your project type, value, and ZIP code to start. Licensed support is available by phone for complex projects or tight deadlines.
One quote request lets you compare available options. Actual quotes depend on carrier review of your project details, location, and coverage scope. Compare what comes back before you bind.
Frequently asked questions
Does the owner or the contractor buy builders risk insurance?
The construction contract determines who buys the policy. Owners often purchase it because they hold the primary financial interest, but a contract can require the general contractor to secure coverage and list the owner and other parties as additional insureds.
Are subcontractors covered under a builders risk policy?
Subcontractors may be covered if the policy names them as insureds or additional insureds. American Institute of Architects (AIA) contract forms typically require the policy to include the interests of the owner, contractor, subcontractors, and sub-subcontractors. Confirm your status in the policy wording before assuming coverage exists.
Does builders risk cover contractor tools and equipment?
Most builders risk policies exclude contractor-owned tools, mobile equipment, and vehicles unless those items are specifically reported in the policy values. Contractors typically need a separate inland marine or tools and equipment floater for their own property.
How much does builders risk insurance cost?
Premiums are generally calculated as a percentage of total completed project value. A public brokerage guide cites a general range of 1% to 5% of project value, with the actual rate depending on project type, construction materials, location, duration, deductible, and coverage extensions. Your quote will reflect your specific project details.
What is the difference between builders risk and general liability?
Builders risk covers first-party physical loss to the project structure and materials during construction. General liability covers third-party injury and property damage claims. A fire that damages the partially built structure would typically be a builders risk claim, subject to policy terms and exclusions. A falling beam that injures a passerby would typically be a general liability claim, subject to that policy's terms and facts.
Does builders risk cover flood and earthquake damage?
Flood and earthquake are commonly excluded from standard builders risk policies. Coverage for these perils can sometimes be added through separate endorsements or policies depending on project location and carrier availability.