Overview
Builders Risk Insurance protects a building, materials and work in progress while a structure is being constructed, renovated, or added to. It is designed to cover physical loss or damage to the project during a defined construction period and stops once the work is finished or the permit is closed.
The coverage limit is typically set to the completed value of the structure (materials and labor, not land). Use the construction budget or contract price to calculate the amount to insure and avoid underinsurance.
Key takeaways
- Coverage protects the structure and building materials during construction, not the land.
- Policy terms are short—commonly three, six, or 12 months—and can often be extended if needed.
- Standard exclusions include earthquake, flood, faulty design or workmanship, and liability for injuries.
How it works
A builders risk policy is written for a specific project, location, and time period. The insured selects a limit that represents the total completed value and pays a premium for that period.
When a covered loss occurs, the policy typically pays to repair or replace damaged portions up to the policy limit, after any applicable deductible. Temporary structures, scaffolding, and materials on-site or at authorized storage are commonly included while they are part of the project.
Some owners or contractors prefer to combine project protection with other coverages; for example, contractors often use an Installation Floater Insurance when materials will be installed temporarily or transported between sites.
What it may cover (and what it may not)
Typical coverages included with the policy are intended to address direct physical loss from covered causes during construction.
- Fire department service charges to save or protect property from a covered loss.
- Removal of debris after a covered loss.
- Losses from the backup of sewers and drains when included by endorsement.
Common exclusions are earthquake, flood, employee theft, mechanical breakdown, contract penalties, war, government action, and faulty design or workmanship. In some high-risk areas you can add earthquake or flood endorsements for additional premium.
The policy does not provide general liability coverage for third‑party injuries or property damage; those exposures require a separate general liability policy or an owner/contractor liability arrangement.
Common mistakes to avoid
- Underinsuring the completed value — using only partial budgets or excluding labor increases the chance of shortfalls after a loss.
- Assuming liability is included — do not rely on this policy for injury or third‑party claims.
- Failing to add endorsements for off‑site storage, transit, or equipment, when those exposures exist.
- Not confirming who is the named insured — owner, contractor, or lender — and how loss payments will be handled.
Questions to ask an agent
- What policy period is recommended, and how do extensions work?
- Which perils are excluded and can any be added back by endorsement?
- How should I calculate the limit to avoid coinsurance or underinsurance?
- Who should be named on the policy (owner, contractor, lender) and how are claims payable?
Next steps
Review your construction budget and list of exposures, including on‑site storage and off‑site transit of materials. For a tailored quote and to compare options, Builders Risk Personal Insurance resources can help clarify owner-specific concerns.
If you want to review coverages or secure a quote, talk to an agent who can match policy features to your project timeline and budget.
Frequently Asked Questions
When should I buy this coverage?
Purchase the policy before construction begins or before materials are delivered to the site to ensure coverage from day one of risk exposure.
Does the policy cover theft of materials?
Theft is often covered, but limits or conditions may apply; verify whether off‑site storage or transit are included or require endorsements.
Can I extend the policy if construction takes longer than expected?
Yes, most policies allow an extension or endorsement to continue coverage beyond the original term for an additional premium.
Will this policy pay for faulty workmanship?
No, faulty design or workmanship is typically excluded; losses arising from poor construction are generally not covered.