Builder’s Risk
What Happens If Disaster Strikes Mid-Project?
Imagine your crew has spent three months framing a custom home. The foundation is poured, walls are up, and the roof is nearly complete. Then a severe storm rolls through overnight. You arrive the next morning to find sections of the structure looking like a skeleton, with significant wind and water damage throughout.
Without the right coverage, you are looking at absorbing a massive loss. Builder's risk insurance exists precisely for this scenario.
What Does Builder's Risk Actually Cover?
Builder's risk insurance, sometimes called course of construction coverage, protects buildings and structures while they are being built or renovated. This is property insurance for projects in progress, covering the structure and materials from the moment construction begins until the project reaches completion.
Standard policies typically cover damage from common perils including:
- Fire and smoke damage
- Vandalism and theft of materials
- Wind, hail, and certain weather events
- Water damage from storms or burst pipes
- Collapse during construction
Coverage extends to building materials on site, fixtures waiting to be installed, and sometimes even materials in transit to the job location. The goal is simple: if something damages your project before you hand over the keys, you are not stuck absorbing the financial hit.
Do I Really Need This Coverage?
If you are financing a project, your lender will almost certainly require proof of builder's risk coverage. But even without that requirement, the question is whether you can afford to restart a project from scratch after an unexpected loss.
A general contractor in the Southeast discovered this reality when a storage building full of materials was broken into over a holiday weekend. The theft set the project back by weeks and cost tens of thousands in replacement materials. His builder's risk policy covered the loss and kept the project moving forward.
Builder's risk is particularly important for ground-up construction, major renovations, and any project where you have significant investment in materials and labor already on site.
What Is Not Covered?
Understanding the limitations helps you avoid surprises. Builder's risk policies generally do not cover:
- Worker injuries or illnesses (that requires workers' compensation)
- Liability claims from third parties (covered by general liability)
- Damage caused by faulty workmanship or design defects
- Your permanent tools and equipment (that is where inland marine comes in)
- Certain natural disasters without specific endorsements
Many contractors in coastal regions or areas prone to severe weather add endorsements for flood, earthquake, or enhanced wind coverage. Talk with your agent about the specific risks your projects face based on location and construction type.