While a construction project is underway, the contract often assigns responsibility for property insurance to the project owner, but courts have sometimes placed the risk on the general contractor until the owner accepts the finished work. Because an owner's policy may exclude perils such as flood or earth movement, contractors can be left exposed for losses they cause.
For that reason, many contractors obtain builders risk insurance with broad coverage, and some carry a Master Builders Risk policy that provides automatic coverage for multiple projects. These master policies base premium on the values of the covered projects and can make a contractor's services more attractive to clients; for more on allocating insurance responsibility in construction projects, see Property Insurance Responsibility in Construction Projects.
Master Builders Risk policies may also offer broader or complementary coverage compared with an owner's policy. They can include differences-in-conditions coverage to fill gaps such as flood or earth movement, and consolidating many jobs under one policy can be more cost-effective than buying separate policies for each job. For background on builders risk options and typical coverages, see Builders Risk Insurance.
Common features of Master Builders Risk policies
- Coverage for projects that begin during the policy term, sometimes extending for a limited period after the term ends (policies vary on how long coverage continues).
- The contractor must report job values periodically during the term (monthly, quarterly, or semi‑annually); the insurer typically calculates the final premium from the average values reported.
- Insurers may offer different premium rates, coverages, deductibles, and limits based on construction type (wood, steel, concrete), fire protection at each location, building use, and exposure to flood or earthquake.
- Optional coverage features may include insurance for systems testing, extra expense and project delay coverage, and reduced deductibles.
Although many projects may be automatically insured, insurers often reserve the right to pre‑approve certain jobs—typically those above specific value thresholds, particular construction types, or projects in special hazard areas. For example, a policy might automatically cover jobs up to a stated limit but require underwriting approval for larger or higher-risk projects, or it may require pre‑approval for flood coverage in special flood hazard zones and for earth movement coverage in earthquake-prone areas.
If an owner plans to rely on a contractor's Builders Risk policy, they should review the policy in advance to confirm the terms and coverages meet their needs. The contractor should review with an insurance agent any questions and address deficiencies before the construction contract is finalized so both sides understand premium responsibilities, evidence of coverage, and reporting requirements.
Frequently Asked Questions
Who typically holds builders risk insurance for a construction project?
Either the owner or the contractor may hold builders risk insurance depending on contract terms, but contractors often obtain coverage to protect against gaps in an owner's policy.
What is a Master Builders Risk policy?
It's a single builders risk policy that automatically covers multiple projects started during the policy term, with premiums based on the combined values of those projects.
Will a builders risk policy cover floods and earthquakes?
Not always; flood and earth movement coverages are often excluded unless specifically added or included through differences‑in‑conditions provisions.
What should an owner check before accepting a contractor's policy?
Owners should confirm coverage limits, named perils, any exclusions, required pre‑approvals, and how premiums and reporting will be handled.