Builder’s Risk Insurance: A Complete Guide for Property Owners & Contractors

If you’re building, renovating, or remodeling a property anywhere in the U.S., builder’s risk insurance (also called course of construction insurance) is one of the most important and most misunderstood policies.

Learn more about coverage options and request a quote on our Builder’s Risk Insurance coverage option on this page

This guide explains what builder’s risk insurance is, what it covers, who needs it, how much it costs, and what it does NOT cover, based on real underwriting standards used nationwide.

What Is Builder’s Risk Insurance?

Builder’s risk insurance is a temporary property insurance policy that protects a building while it is under construction or major renovation.

Once construction is completed or the property becomes occupied, coverage ends and must be replaced.

Depending on how the building will be used, owners typically transition to Commercial Property Insurance or a Business Owner’s Policy (BOP) to maintain continuous protection.

Coverage typically applies from:

• The start of construction

• Until the project is completed or occupied

Once construction ends, the policy expires and must be replaced with:

• Homeowner insurance (HO3)

• Landlord insurance (DP3)

• Commercial property or BOP

What Does Builder’s Risk Insurance Cover?

Most builder’s risk policies cover physical damage to:

Covered Property

• Structure under construction

• Building materials (on-site, in transit, or temporarily stored)

• Fixtures and equipment

• Temporary structures related to the project

Covered Causes of Loss

• Fire

• Wind & hail

• Theft

• Vandalism

• Lightning

• Explosion

• Vehicle or aircraft impact

⚠️ Coverage varies by carrier, policy form, and endorsements.

What Does Builder’s Risk Insurance NOT Cover?

Understanding exclusions is critical to avoiding denied claims.

Common Exclusions:

• Normal wear and tear

• Faulty workmanship or design defects

• Flood (unless endorsed)

• Earthquake (unless endorsed)

• Employee theft

• Delay in completion

• Loss of income

• Labor costs (often excluded)

👉 Builder’s risk covers physical damage, not business mistakes or delays.

It’s important to understand that builder’s risk insurance only covers physical damage to the property. It does not cover bodily injury, third-party property damage, or lawsuits.

Contractors and developers typically pair builder’s risk with General Liability Insurance to fully protect their business during construction.

Who Needs Builder’s Risk Insurance?

Builder’s risk insurance is commonly purchased by:

Typical Buyers

• Property owners

• Real estate investors

• General contractors

• Developers

• Homeowners doing major renovations

• SBA or lender-financed projects

Who Should Be Named Insured?

• Property owner or holding LLC

• Sometimes the general contractor

• Lender listed as mortgagee (if applicable)

Many lenders require builder’s risk coverage before releasing funds.

Does Homeowners Insurance Cover Builder’s Risk?

No, standard homeowners insurance does not cover properties under construction or major renovation.

Common exclusions include:

• Vacant structures

• Unfinished buildings

• Significant remodeling projects

This gap is one of the most common reasons for uninsured losses during construction.

How Much Does Builder’s Risk Insurance Cost?

Builder’s risk premiums are based on:

• Completed project value

• Construction duration

• Location

• Type of construction

• New build vs renovation

• Security measures on-site

Typical Nationwide Ranges:

• Small residential projects: $500 – $2,500

• Large renovations or commercial builds: $2,000 – $15,000+

Premiums are calculated using the total completed value, not just materials.

Is Builder’s Risk Policy Worth It?

If you have money invested in a project under construction, yes.

Builder’s risk insurance protects:

• Construction materials

• Work in progress

• Your capital during the highest-risk phase

Without it, even a single fire or theft loss can stop a project entirely.

What Happens When Construction Is Completed?

Builder’s risk insurance is a temporary policy designed only for the construction phase. Once construction is completed or the property becomes occupied, builder’s risk coverage automatically ends and must be replaced.

Depending on how the building will be used, owners typically transition to Commercial Property Insurance or a Business Owner’s Policy (BOP) to maintain continuous protection after construction is finished.

Failing to switch coverage promptly can leave the property uninsured, which may violate lender requirements or expose the owner to significant financial risk.

Government agencies and lenders emphasize the importance of proper insurance during construction. According to the U.S. Small Business Administration, having the right insurance coverage is essential to protecting your investment and securing financing.

Source: U.S. Small Business Administration – Business Insurance