Builder’s Risk Insurance in the US: What Small Contractors and Property Owners Should Check

Construction projects can create insurance questions before the work is finished. A property may be partly built, materials may be stored on site, tools may move between locations, and several contractors may be involved. If fire, theft, wind, vandalism, water damage, or another covered event happens during the project, it may not be clear which policy applies.

Builder’s risk insurance is designed to help protect certain construction projects while they are being built or renovated. It may be relevant for property owners, small contractors, developers, remodelers, and business owners improving a building.

This guide explains what small contractors and property owners in the United States should check before relying on builder’s risk insurance.

Editorial note: This article is for general educational purposes only. It does not provide legal, financial, construction, contract, or insurance advice. Coverage terms, exclusions, limits, deductibles, covered property, project eligibility, and state rules vary by insurer and policy. Property owners and contractors should review policy documents and speak with a licensed insurance professional or attorney when needed.

What Is Builder’s Risk Insurance?

Builder’s risk insurance, sometimes called course of construction insurance, may help protect a building or project while construction or renovation is underway. It usually focuses on physical damage to the project, materials, fixtures, and certain property related to construction.

This coverage may apply to projects such as:

• new home construction
• commercial building construction
• major renovations
• tenant improvements
• building additions
• remodeling projects
• property restoration work

Builder’s risk insurance is not the same as general liability insurance. It is mainly about covered physical damage to the project itself.

Who May Need Builder’s Risk Insurance?

The person or business that needs builder’s risk insurance depends on the contract and project structure. Sometimes the property owner buys it. Sometimes the general contractor arranges it. In other cases, a lender or lease agreement may require it.

Parties that may need to review builder’s risk coverage include:

• homeowners building a new home
• property owners doing major renovations
• small general contractors
• commercial landlords improving a space
• business owners building out a leased location
• real estate investors renovating property
• developers managing small projects

The contract should clearly state who is responsible for obtaining coverage.

Why Standard Property Insurance May Not Be Enough

A standard homeowners or commercial property policy may not fully cover construction work, major renovations, or a building under construction. Some policies have exclusions or limitations when a property is vacant, under renovation, or not yet completed.

Before starting work, property owners should ask:

• Does my current property policy cover construction work?
• Does coverage change if the building is vacant?
• Are materials stored on site covered?
• Are theft and vandalism covered?
• Is water damage during construction covered?
• Does the lender require builder’s risk coverage?

It is safer to review these questions before work begins, not after a loss.

What Builder’s Risk Insurance May Cover

Coverage varies, but builder’s risk insurance may cover certain physical losses to the project during the policy period.

Covered property may include:

• the building under construction
• building materials
• fixtures
• temporary structures
• materials stored on site
• materials in transit if included
• equipment installed as part of the project

Covered causes of loss may include fire, theft, vandalism, wind, lightning, or certain other events, depending on the policy.

What May Not Be Covered

Builder’s risk policies contain exclusions. These exclusions matter because construction projects often involve many different risks.

Common exclusions or limited areas may include:

• poor workmanship
• design errors
• normal wear and tear
• employee theft
• earthquake unless added
• flood unless added
• mechanical breakdown
• tools and equipment not permanently installed
• contractor liability claims
• delay costs unless specifically included

Every policy is different, so owners and contractors should read the actual policy wording.

Builder’s Risk vs General Liability

Builder’s risk and general liability insurance serve different purposes.

Coverage Type	Main Purpose	Example
Builder’s Risk	May cover physical damage to the project under construction.	Stored materials are stolen from the job site.
General Liability	May cover certain third-party injury or property damage claims.	A visitor is injured at the job site and files a claim.
Workers’ Compensation	May cover employee work-related injuries, subject to state rules.	An employee is injured while working on the project.

A construction project may need more than one type of insurance.

Renovation Projects Need Careful Review

Renovations can be tricky because part of the building already exists and part of it is being improved. The owner should confirm whether the existing structure, new work, and stored materials are covered.

Questions to ask include:

• Is the existing building covered?
• Is only the new work covered?
• Are materials stored inside the property covered?
• Are temporary walls or structures covered?
• Does vacancy affect coverage?
• Are subcontractors included?

Major renovation work should not begin until insurance responsibility is clear.

Materials Stored Offsite or in Transit

Construction materials may be stored at a warehouse, supplier location, or another property before they arrive at the job site. They may also be transported by truck.

Builder’s risk policies may or may not cover materials offsite or in transit. If expensive materials are ordered early, this can be important.

Review:

• offsite storage coverage
• transit coverage
• storage location requirements
• maximum limits for stored materials
• documentation required after a loss

Do not assume materials are covered just because they are intended for the project.

Theft and Vandalism at Job Sites

Construction sites can be vulnerable to theft and vandalism, especially when materials, copper, appliances, lumber, tools, or equipment are left onsite.

Risk reduction steps may include:

• fencing the site
• locking materials in secure areas
• using lighting or cameras
• keeping inventory records
• limiting site access
• removing high-value tools overnight

Insurance may help with covered theft, but the policy may also require reasonable site protection.

Water Damage During Construction

Water damage is a common construction risk. It may come from rain intrusion, plumbing issues, unfinished roofs, temporary openings, or drainage problems.

Policy terms can vary widely for water damage. Some policies may include water damage, while others may limit or exclude certain causes.

Before work begins, review:

• roof opening protection
• temporary weatherproofing
• plumbing testing procedures
• water damage exclusions
• deductibles for water damage
• site inspection procedures

Good construction controls can reduce the chance of water damage claims.

Soft Costs and Delay Coverage

Some builder’s risk policies may offer optional coverage for soft costs or delay-related expenses. This is not automatic in every policy.

Soft costs may include certain additional expenses after a covered delay, such as:

• architect or engineering fees
• permit costs
• loan interest
• legal fees
• additional property taxes
• advertising or leasing costs

Business owners and property owners should ask whether delay-related expenses are included, excluded, or available by endorsement.

Project Value and Coverage Limits

The coverage limit should reflect the project value. Underinsuring the project can create problems if a loss occurs.

When setting limits, review:

• construction contract amount
• materials cost
• labor cost
• architect and engineering fees
• existing structure value if included
• change orders
• soft costs if covered

If the project value changes, the policy may need to be updated.

Policy Period and Project Timeline

Builder’s risk insurance is usually tied to the construction timeline. If the project runs longer than expected, coverage may need to be extended.

Important timing questions include:

• When does coverage begin?
• When does coverage end?
• Does coverage end at completion, occupancy, or sale?
• What happens if the project is delayed?
• Can the policy be extended?
• Is there a reporting requirement for delays?

Do not let coverage expire before the project is finished.

Who Should Be Listed on the Policy?

Construction projects often involve property owners, contractors, lenders, architects, and subcontractors. The policy should identify the proper named insureds and additional insureds where needed.

Parties to review may include:

• property owner
• general contractor
• lender
• subcontractors
• architect or engineer
• tenant if tenant improvements are involved

Contracts and insurance documents should match. If the wrong party is omitted, claim handling may become more complicated.

Contract Requirements

Construction contracts should explain insurance responsibilities clearly. If the contract is vague, disputes can happen after a loss.

Contract questions include:

• Who buys builder’s risk coverage?
• What limits are required?
• Which parties are insured?
• Who pays the deductible?
• Is waiver of subrogation required?
• Are subcontractors covered?
• What happens after a covered loss?

Property owners and contractors should review contracts before the project starts.

When Coverage May End

Builder’s risk coverage usually does not continue forever. It may end when the project is completed, accepted by the owner, occupied, sold, or when the policy expires. The exact rule depends on the policy.

Coverage ending too early can create a gap before the permanent property policy begins.

Before completion, confirm:

• when builder’s risk coverage ends
• when permanent property coverage begins
• whether partial occupancy affects coverage
• whether tenant move-in changes coverage
• whether final inspections affect timing

Builder’s Risk Insurance Checklist

• Confirm who is responsible for buying coverage.
• Review whether the existing structure is covered.
• Check coverage for materials onsite, offsite, and in transit.
• Review theft, vandalism, wind, and water damage terms.
• Ask whether flood or earthquake must be added separately.
• Check soft costs and delay coverage.
• Set limits based on the full project value.
• Make sure the policy period matches the project timeline.
• List the correct insured parties.
• Review contract insurance requirements.
• Confirm when permanent property insurance begins.

Common Mistakes to Avoid

• assuming homeowners insurance covers major construction
• starting work before coverage is arranged
• not covering materials stored offsite
• forgetting theft and vandalism risk
• underinsuring the project value
• letting coverage expire during delays
• not listing the correct parties
• ignoring contract insurance requirements
• assuming delay costs are automatically covered

Frequently Asked Questions

Is builder’s risk insurance required?

It may be required by a lender, construction contract, lease, or project owner. Even when not required, it may be worth reviewing for new construction or major renovation projects.

Does builder’s risk insurance cover contractor mistakes?

Not always. Poor workmanship, design errors, or construction defects may be excluded or limited. Contractors may need separate liability or professional coverage depending on the work.

Does builder’s risk cover tools?

Tools and equipment may not be covered unless specifically included. Contractors should review inland marine or contractor equipment coverage if tools move between jobs.

Who buys builder’s risk insurance?

It depends on the contract. The owner, general contractor, or developer may be responsible. The contract should state who obtains coverage and who is included.

When does builder’s risk coverage end?

Coverage may end when the project is completed, occupied, accepted, sold, or when the policy expires. The exact timing depends on the policy terms.

Final Thoughts

Builder’s risk insurance in the United States can be important for new construction, major renovations, tenant improvements, and property development projects. It helps address certain physical damage risks while work is underway.

Small contractors and property owners should review covered property, exclusions, materials in transit, theft, water damage, soft costs, project limits, policy period, insured parties, and contract requirements before construction begins.

The best time to review builder’s risk insurance is before the first materials arrive on site.