Overview
Builder's risk insurance protects buildings, materials, and work-in-progress during construction until ownership transfers at completion.
Who buys the policy can vary: sometimes the property owner (the client) purchases it, and sometimes the contractor buys it to protect their business interests.
Key takeaways
- Builder's risk covers physical loss or damage to a construction project while it is being built.
- Either the client or the contractor may purchase the policy; the choice often depends on trust, experience, and contract terms.
- Confirm who is named as the policyholder and who is an additional insured to avoid coverage disputes.
How it works
The policy is written for a specified period, usually the expected construction timeline plus a short completion window, and it lists the insured property and covered perils.
Payments for damaged materials typically go to the policyholder, but contractors commonly require proof of coverage and may ask to be named as an additional insured or loss payee.
For standard residential projects, you can learn more about policy options and typical terms with resources like New Residential Construction Builders Risk Insurance.
What it may cover (and what it may not)
Common coverages include on-site materials, temporary structures, installed work, and sometimes off-site materials in transit or storage when specified.
Typical exclusions are normal wear and tear, faulty workmanship (unless it causes a covered loss), employee theft by default, and some acts of war or pollution unless added by endorsement.
Specialized installs or equipment may need tailored coverage; see options such as Installation Floater / Installation Builders Risk Insurance when the project includes unique components.
Common mistakes to avoid
Failing to name all interested parties on the policy can lead to disputes over claim proceeds.
Underinsuring the project or omitting transit and storage can leave owners or builders responsible for unreimbursed losses.
Assuming the contractor's general liability will cover property damage to the project is a frequent error; builder's risk is a separate product.
Questions to ask an agent
Who will be the named insured, and who can be added as an additional insured or loss payee?
What perils are covered, and which endorsements are recommended for site-specific risks such as theft, wind, or flood?
How does the policy handle soft costs, code upgrades, and delay-in-completion expenses?
Next steps
Review your construction contract to see which party is contractually responsible for insurance and confirm responsibilities in writing.
Obtain quotes that list all interested parties and compare limits, deductibles, endorsements, and reporting requirements before purchase.
If you are unsure which approach fits your project or need a starting point for quotes, consider reaching out to a broker and talk to an agent for tailored guidance.
Frequently Asked Questions
Who typically receives claim payments on a builder's risk policy?
Claim payments generally go to the named insured, but the policy can list other parties as additional insureds or loss payees to protect their financial interest.
Can a contractor buy builder's risk even if the owner prefers to purchase it?
Yes; contractors can buy the policy and arrange reimbursement in the contract, but this should be agreed upon in advance to avoid billing disputes.
Does builder's risk cover vandalism and theft?
Vandalism and theft are commonly covered, but limits and conditions vary, so confirm those perils and any required security measures with the insurer.
How long does coverage last?
Coverage typically lasts for the construction period plus a short completed value period; extensions and endorsements can lengthen that term if needed.