Builders risk insurance: what it is and how to place it

Builders risk insurance covers a building or structure during construction — from groundbreaking to occupancy. It is a project-specific coverage that fills a critical gap: standard commercial property insurance doesn't cover buildings under construction, and the contractor's GL doesn't cover the structure itself. Every construction project needs builders risk, but it's often overlooked or purchased at the last minute.

What builders risk covers

Builders risk is a property coverage — it covers physical loss or damage to the building under construction. Standard covered perils include fire, wind, hail, lightning, vandalism, theft of materials, and collapse. Flood and earthquake are typically excluded and require separate endorsements or separate policies.

Beyond the structure itself, builders risk typically extends to cover:

• Materials and supplies on the project site
• Materials in transit to the site (with coverage territory limits)
• Temporary structures — scaffolding, temporary offices, fencing
• Soft costs — additional architectural fees, permit fees, and financing costs caused by a covered loss that delays the project

Notably, builders risk does not cover contractor equipment. The contractor's own tools and equipment need an inland marine / contractors equipment floater. Builders risk covers the project; inland marine covers the contractor's tools used to build it.

Who purchases builders risk

This varies by project type and contract structure, but the most common arrangements are:

• Property owner / developer — the most common arrangement for commercial construction projects. The owner purchases builders risk covering the entire project, with the general contractor and subcontractors listed as additional insureds.
• General contractor — on some projects (particularly residential or when the contract requires it), the GC purchases builders risk. This is common for design-build and owner-builder arrangements.
• Lender-required — construction lenders typically require builders risk as a condition of the construction loan, and may specify minimum limits and coverages.

Always ask your contractor clients who is buying builders risk on each project — don't assume they're covered. A contractor who assumes the owner bought it and didn't, and experiences a major fire during construction, faces a significant uninsured loss.

Builders risk underwriting factors

Builders risk is underwritten on a project-by-project or annual basis. Key factors include:

• Project type — new construction vs. renovation, residential vs. commercial
• Construction value (completed value) — the total replacement cost at completion is the policy limit
• Project location — exposure to catastrophic perils (wind, flood, earthquake) significantly affects pricing
• Construction type — frame construction is more expensive to insure than masonry or steel
• Project duration — longer projects have more time for something to go wrong
• Site security — fencing, lighting, security cameras, and after-hours watchmen reduce theft risk

Policy period and when coverage ends

Builders risk is a temporary coverage that ends when the project is complete. "Completion" is typically defined as: when the building is occupied, when the certificate of occupancy is issued, or when the policy period ends — whichever comes first. Agents should monitor project timelines and discuss policy extensions with clients if a project runs over schedule. A building that's 95% complete but not yet occupied when the builders risk expires is in a dangerous coverage gap.

Once the building is occupied and complete, the client should transition to permanent commercial property insurance. Coordinating this transition is an important service opportunity — and a missed renewal conversation if not tracked.

Annual builders risk programs for high-volume contractors

Contractors who build multiple projects per year may qualify for an annual builders risk program — a blanket policy that automatically covers new projects as they begin, rather than requiring a separate policy for each project. This is more efficient for the contractor and provides consistent coverage terms across all projects. See our complete guide to commercial insurance for contractors for the full coverage picture.

Track every project's coverage from intake to completion

AgencyAssist captures project details, values, and timelines so you never miss a builders risk opportunity — or a policy expiration.