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Builder's risk insurance

Builder’s Risk Insurance: Comprehensive Protection for Buildings Under Construction

What is Builder’s Risk Insurance?

Builder’s risk insurance, also known as course of construction insurance, provides essential coverage for buildings that are under construction. This specialized type of property insurance covers the building itself, along with any materials, supplies, and equipment on the construction site. The coverage extends to various risks, including fire, theft, vandalism, and certain weather-related damages, ensuring that the project can continue smoothly without significant financial setbacks.

Why is Builder’s Risk Insurance Important?

Construction projects are vulnerable to numerous risks, from weather-related damage to theft and vandalism. Builder’s risk insurance mitigates these risks by providing financial protection, which is crucial for the continuity and completion of the project. This type of insurance is often required by contractors and sometimes mandated by law, emphasizing its importance in the construction industry.

Who Pays for Builder’s Risk Insurance?

Typically, the contractor is responsible for purchasing builder’s risk insurance. The cost is often distributed among all parties involved in the construction project, including subcontractors and other stakeholders. It is essential that everyone participating in the construction is listed as a beneficiary on the policy. This ensures comprehensive coverage and protects all parties from potential financial losses due to unforeseen events.

What Does Builder’s Risk Insurance Cover?

Builder’s risk insurance covers a wide range of potential damages and losses, including:

  • Structural Damage: Coverage for any physical damage to the building under construction, whether it’s due to a fire, severe weather (excluding tornadoes, floods, or earthquakes), or other covered perils.
  • Materials and Supplies: Protection for materials and supplies stored on-site or in transit to the construction site.
  • Theft and Vandalism: Coverage for losses resulting from theft of materials or equipment and vandalism on the construction site.
  • Weather-Related Damage: Damage caused by wind, rain, hail, and other non-excluded weather events.

What Builder’s Risk Insurance Does Not Cover

While builder’s risk insurance offers extensive protection, there are certain exclusions:

  • Construction Errors: Faults or damages resulting from construction errors, poor workmanship, or the use of defective materials are not covered. For such risks, contractors need professional liability insurance.
  • Tools and Equipment: Coverage does not extend to the contractor’s tools or equipment unless specified in the policy.
  • Employee Injuries: Injuries sustained by workers on the construction site are not covered; a separate workers’ compensation policy is required for such incidents.
  • Specific Weather Events: Damage from tornadoes, floods, or earthquakes typically requires additional endorsements or separate policies.

Extending Builder’s Risk Insurance Coverage

For construction projects in areas prone to specific natural disasters like floods or tornadoes, it’s advisable to extend the builder’s risk policy to include these perils. This ensures comprehensive protection against all potential risks that could disrupt the project.

Cost of Builder’s Risk Insurance

The cost of builder’s risk insurance generally ranges between 1% and 4% of the total construction value. Several factors influence the premium, including:

  • Project Value: Higher-value projects typically incur higher premiums.
  • Location: Construction sites in areas with higher risk of theft, vandalism, or severe weather may attract higher premiums.
  • Construction Materials: The use of high-value materials can also increase insurance costs.
  • Coverage Limits and Deductibles: Higher coverage limits and lower deductibles will raise the premium.


Builder’s risk insurance is a vital component of any construction project, providing financial protection against a variety of risks that could potentially derail the project. By understanding the scope and limitations of this insurance, contractors and stakeholders can ensure they have adequate coverage to safeguard their investments and complete their projects successfully. For more information on securing the best builder’s risk insurance policy for your needs, feel free to contact us today.

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