Builder’s Risk Insurance, also known as Course of Construction Insurance, is a specialized property insurance designed to protect buildings and structures under construction. It covers damage or loss to the project site during the build phase, including materials, equipment, and partially completed structures.
What is Builder’s Risk Insurance?
Builder’s Risk Insurance provides temporary coverage for physical loss or damage that may occur during a construction or renovation project. Unlike standard property insurance, which typically covers completed structures, Builder’s Risk is tailored explicitly for active construction sites where risk levels are significantly higher due to exposure to weather, theft, accidents, and vandalism.
The project owner, general contractor, or developer generally purchases this insurance policy. It serves as a financial safety net, ensuring unforeseen incidents don’t derail timelines or inflate budgets due to unexpected out-of-pocket repair costs.
What Does Builder’s Risk Insurance Cover?
Coverage varies by policy and provider, but a standard Builder’s Risk Insurance policy typically includes:
- Fire, Lightning, and Explosions
- Theft and Vandalism
- Windstorm and Hail Damage
- Vehicle or Aircraft Collisions
- Accidental Damage
- Collapse of Structures
- Cost of Debris Removal
- Temporary Structures (e.g., scaffolding or construction trailers)
- Materials in Transit or Stored Off-Site
Some policies may offer additional endorsements to cover:
- Soft Costs (e.g., interest on construction loans, legal fees, architectural redesigns)
- Delay in Completion losses
- Equipment Breakdown
- Flood or Earthquake Damage (optional or required, depending on location)
What’s Not Covered?
Builder’s Risk Insurance generally does not cover:
- Employee injuries (covered by Workers’ Compensation)
- Liability claims from third parties (covered by General Liability Insurance)
- Poor workmanship or design errors
- Tools and the contractor’s equipment
- Wear and tear or ordinary deterioration
- War, terrorism, or government actions (unless specifically included)
Who Needs Builder’s Risk Insurance?
This type of insurance is essential for any stakeholder involved in a construction or renovation project, including:
- Property Owners / Real Estate Developers
- General Contractors and Subcontractors
- Home Builders
- Lenders / Financial Institutions (often require proof of insurance as a loan condition)
- Architects and Project Managers (in cases of design-build contracts)
In many cases, contracts specify which party is responsible for obtaining and maintaining Builder’s Risk Insurance during the project duration.
Duration of Coverage
Builder’s Risk policies are temporary. Coverage typically starts when construction begins and ends when the project is:
- Completed and ready for occupancy
- Transferred to permanent property insurance
- Put on hold or abandoned
Most policies are written for 3, 6, 9, or 12 months and can often be extended if the project experiences delays.
Construction sites are unpredictable environments with high risk exposure. A single incident, like a storm damaging an unfinished structure or theft of high-value materials, can result in thousands or even millions of dollars in losses and delays. Builder’s Risk Insurance helps safeguard the project’s financial stability and gives stakeholders peace of mind, knowing that potential damage will not result in devastating financial setbacks.
Builder’s Risk Insurance is a crucial component of risk management for construction projects. It protects the investment during the most vulnerable phase, when the structure is incomplete and most exposed. Securing this coverage ensures continuity, maintains timelines, and protects all involved parties from costly surprises.