Builder’s risk insurance, explained.
Builder’s risk is temporary property insurance on a construction project while it is being built — the new work and the materials on site, plus delay costs if you add them. It should be in force before the first materials arrive, and it ends at the first trigger written into the policy — typically completion, acceptance, occupancy or a lease, depending on the form.
- Also called
- Course of construction (COC)
- What it insures
- The work in progress, plus materials on site and in transit
- Policy term
- Written to the construction schedule, not a calendar year
- Who buys it
- Whoever carries risk of loss under the construction contract
- Who requires it
- Almost always the construction lender, as a condition of funding
- What it is not
- Not general liability, not workers’ comp, not a surety bond
Light RFP Builder’s risk insurance
Why it existsAn ordinary property policy was not written for a building site.
Property insurance is written for a finished, occupied building. A construction site is the opposite of that in four specific ways, and each one is a reason the market prices this separately rather than bolting it onto an existing policy.
The building is open
A finished roof turns a storm into a wet ceiling. An open deck turns the same storm into a total loss of everything below it.
The value moves
On day one the project is a hole in the ground. On day 300 it is worth millions. A policy written for a fixed value cannot follow that.
Your existing policy excludes the likeliest loss
Copper, lumber and fixtures sit on site for weeks before they are installed, and site theft is one of the most common construction losses. The standard homeowners form covers those materials against fire or wind — but it excludes theft in or to a dwelling under construction, and theft of the materials themselves, until the dwelling is finished and occupied. That exclusion has no active-work carve-out: it applies on a fully staffed job.
A stalled job loses more cover
If work stops and the building sits empty, vacancy conditions bite. A homeowners policy drops vandalism and glass cover after 60 consecutive vacant days. Newer editions treat a dwelling under renovation as not vacant; the older edition, still in use, exempts only one under construction. Commercial property policies carry broader vacancy conditions of their own.
What it covers, and what belongs on a different policy.
Builder’s risk is usually written on an all-risk basis — everything is covered except what the policy explicitly excludes, rather than only the perils it lists by name. The exclusions matter more than the inclusions, because the most common builder’s risk complaint is a claim filed on the wrong policy.
Read the two lists below as the shape of the market, not as your cover. ISO publishes a model form, but most carriers write their own wording, so both sides move from carrier to carrier and several of these lines carry sublimits rather than full limits. What you are actually covered for is the terms of the policy issued to you.
Typically covered
- Fire, lightning, windstorm and hail
- Theft of building materials from the site — usually, on inland marine forms; the ISO commercial form excludes theft of materials not yet installed unless a theft endorsement is added
- Vandalism and malicious mischief
- Vehicle or aircraft impact, and falling objects
- Collapse during construction — on many inland marine forms including collapse from defective materials or methods; the ISO commercial form removes that unless it is added back
- Materials in transit and in temporary off-site storage — usually only to a separate, smaller limit; the ISO commercial form caps transit at $5,000
Not covered — and what covers it
- Someone is injured on your site
- General liability (CGL)
- Your own employee is hurt at work
- Workers’ compensation
- The contractor’s excavator, lift or tools
- Contractor’s equipment / inland marine
- The architect or engineer designed it wrong
- Professional liability (errors & omissions)
- Flood or earthquake
- Excluded by default — bought back by endorsement, or as standalone flood
- The existing building, on a renovation
- Your existing property or homeowners policy — keep it in force. Builder’s risk covers the existing structure only if the policy is specifically endorsed to include it.
- The defective work itself
- Usually nobody — most forms pay for damage a defect causes elsewhere, not for redoing the defect itself. The London LEG clauses set where that line falls; see the FAQ below.
- Anything after the policy’s end trigger — occupancy, a lease, acceptance or sale
- The owner’s permanent property policy, which should be bound before that day
Whoever carries risk of loss under the contract.
That is a contract term, not a job title — and it is worth settling in writing before work starts, because owners and contractors routinely each assume the other one bought it. In practice the purchase is nearly always forced by the same party: the construction lender, who will not release a draw without a certificate naming them.
Owners and developers
Ground-up projects, and most private development
You own the work in progress, so you carry the loss. Your construction lender will not release a draw without a certificate naming them.
General contractors
When the contract pushes the obligation down to you
Public bid specs and many private contracts require the contractor to carry builder’s risk for the project and name the owner. Read the insurance article before you price the job.
Homeowners and small owners
Custom builds and major renovations
Keep your homeowners policy in force — it usually still covers the house itself, and builder’s risk on a renovation normally does not. What it handles badly is the work in progress, theft of materials on site, and a house left empty too long. Tell your insurer before work starts; some restrict or even non-renew a policy on a vacant house under renovation.
Subcontractors
Almost never buy their own
You are normally insured under the project policy, but check exactly how you are named on it — the wording decides which of its coverages actually reach you, and some reach only the named insured on the declarations. What you do need separately is cover for your own tools and equipment.
Renovations are underwritten harder than new builds.
Both are insurable, but they are not the same risk. A ground-up project starts at zero — if it burns in week two, the carrier has lost a foundation. A renovation differs in two ways. First, the existing building is normally not covered unless the policy is specifically endorsed to include it, so it stays on your existing property or homeowners policy. Second, the work itself puts that building at risk: opened roofs, disabled sprinklers, hot work, and wiring nobody has documented since 1974. That is why a renovation gets a longer application and a closer look at the existing structure — our own form asks 49 questions on a typical new build and 72 on a renovation.
See the questions before you commit to anything.
The application is free to open and nothing is sent until you press Send on the review sheet. You can also read every question without filling in a single one.
Five things decide what a builder’s risk policy costs.
Nobody can quote builder’s risk without a project budget, because the completed value is the number everything else is calculated from.
Completed value
The primary rating input. You insure what the finished project will be worth — labour and materials, the hard costs. Not the land, which cannot burn.
Soft costs
The knock-on expenses when a loss delays you: extra construction-loan interest, re-pulling permits, the architect’s fee to redraw, rent you had counted on. Almost always a separate limit you have to elect — and the one people forget.
Term
Written to the construction schedule with extension options. Run past the term without extending and the project is uninsured.
Deductibles
Usually split: a flat deductible for most losses, a percentage-of-value deductible for named storms on the coast, and often a separate one for water damage.
Site controls
Fencing, lighting, cameras, a hot-work permit system and a water-damage plan all move the price, because they move the claim frequency.
What actually changes when you cross a state line.
Less in the policy than people expect, and more around it. The wording is usually the carrier’s choice rather than the state’s — but where you are allowed to buy, what tax you pay, how the storm deductible is written and what your contract can demand of you all move at the border.
There is no state-standard builder’s risk form
Builder’s risk is normally written as inland marine, which most states exempt from rate and form filing. Unlike auto or homeowners, no regulator publishes a standard wording — so two carriers in the same state can hand you materially different policies. The differences between quotes are almost always the carrier’s, not the state’s. Read the form, not the state.
Where you are allowed to buy it
Harder projects go to the surplus lines (non-admitted) market. Most states require a diligent search of admitted carriers first — commonly three declinations — then add a surplus lines tax, usually somewhere between 2% and 6% of premium, plus a stamping fee. The trade-off worth knowing: surplus lines policies are not protected by the state guaranty fund if the carrier fails.
How the catastrophe deductible is written
Inland, wind and hail usually carry a flat-dollar deductible. On the coast it is written as a percentage of insured value, commonly 1% to 5% — on a $2m project, a 2% named-storm deductible is $40,000 before the policy pays anything. In Texas, wind on the first-tier coastal counties may have to go to TWIA, which requires a WPI-8 certificate confirming the structure meets the state windstorm building code.
What your contract is allowed to make you carry
Anti-indemnity statutes differ sharply by state, and a few — Kansas and Oregon among them — extend those limits to contractually required insurance. Those statutes are written around LIABILITY cover rather than first-party property, so they bite on the general liability and indemnity articles of a subcontract more than on the builder’s risk itself. The identical subcontract can still allocate risk very differently in two states, which is why the insurance article is worth reading in the state the work is in.
Treat all of the above as the shape of the question, not the answer for your project. Confirm the specifics with a broker licensed in the state the work is in — national rules of thumb are least reliable exactly where the money is.
Builder’s risk is not a surety bond.
Both are paper you have to produce before a project can start, which is why they get conflated. They work in opposite directions: the insurance protects the project from bad luck, and the bond protects the owner from the contractor.
Builder’s risk
Insurance · two parties
- Who is protected
- You — the owner or contractor who owns the work in progress.
- What triggers it
- Accidental physical damage to the project: fire, storm, theft, vandalism.
- After a claim
- The carrier pays you and that is the end of it. No reimbursement.
Surety bond
Credit guarantee · three parties
- Who is protected
- The project owner, against the contractor failing to perform or pay.
- What triggers it
- Default: the contractor does not finish, or does not pay their subs.
- After a claim
- The surety pays the owner, then comes after the contractor to recover it. Closer to a line of credit than to insurance. We write bid, performance and payment bonds too.
Builder’s risk, answered.
Who pays for builder’s risk, the owner or the contractor?
Whoever the construction contract puts it on. Under the AIA 2017 documents the owner is still the default purchaser — the requirement sits in A201-2017 Section 11.2 and in the Insurance and Bonds Exhibit to A101-2017 — and the owner also carries the deductible and handles the claim. Plenty of contracts reassign it to the general contractor instead. Settle it in writing before work starts, because both sides routinely assume the other one bought it.
When does builder’s risk coverage end?
At the first of several triggers written into the policy: expiry, the owner’s acceptance of the work, sale, abandonment, or the building being occupied, leased or put to its intended use. How much runway occupancy gives you depends on the form: the ISO commercial form allows 60 days after occupancy and 90 days after completion, while other forms end cover as soon as anyone occupies the building without the insurer’s written consent, or once the building — or a set share of it — is leased. If anyone will move in before the project is closed out, get the insurer’s written permission first.
Does builder’s risk cover a renovation, or only new construction?
Both, but on a renovation the policy normally covers the new work and materials — not the building you already own, unless the policy is specifically endorsed to include the existing structure. Keep that building insured under your existing property or homeowners policy, and tell that insurer about the work. Expect more questions than on a ground-up build either way: an open roof, disabled sprinklers, hot work and old wiring all raise the risk to the whole building.
Is builder’s risk the same as a performance bond?
No. Builder’s risk is insurance: you pay a premium and the carrier pays you if something accidental damages the work, with no reimbursement. A surety bond is a credit guarantee: the surety promises the owner that the contractor will perform, and if the surety pays a claim it comes after the contractor to recover the money.
Does builder’s risk work differently from state to state?
Less than people expect in the policy itself, and more than they expect around it. Builder’s risk is normally inland marine, which most states exempt from rate and form filing, so there is no state-standard wording — the gap between two quotes is usually the carrier’s doing, not the state’s. What genuinely varies is whether the risk has to go to the surplus lines market and what tax that adds, how the wind and hail deductible is written on the coast, and what a construction contract in that state is allowed to require of you.
Does builder’s risk pay to fix defective work?
Usually not the defective work itself. Most forms pay for damage a defect causes elsewhere — if a badly made pipe joint leaks and floods the floor below, the water damage to the floor may be covered, but the joint itself is not. The London Engineering Group’s LEG clauses are the market’s standard way of setting that line: LEG 1 excludes the defect and everything it causes, LEG 2 excludes what fixing the defect would have cost just before the damage, and LEG 3 is the broadest. How far LEG 3 reaches is not settled — the first US court to read it, in 2023, found it ambiguous. Ask which clause is on your policy.
How much does builder’s risk insurance cost?
It is rated mainly off the completed value of the project, then adjusted for construction type, location and catastrophe exposure, the length of the schedule, the deductible you choose and the site controls in place. Because completed value drives it, nobody can quote a builder’s risk policy without knowing the project budget.
Does builder’s risk cover flood and earthquake?
Not by default. Both are standard exclusions. They can usually be added back by endorsement, subject to their own limits and deductibles, and in high-hazard zones they may have to be placed separately. Ask for them explicitly rather than assuming the policy includes them.
Tell us about the project and we will quote it.
Answer what you can across five sheets — most of it comes straight off the construction contract and the project budget. We enter it with the carrier and come back with pricing. Owners managing a wider portfolio can also start from business insurance.