Key Takeaways
- Builder’s risk (also called course of construction) covers a building and its materials while it is being built or renovated.
- A standard property or general liability policy generally will not cover a structure under construction — this is the gap builder’s risk fills.
- It typically covers the structure, materials on site, and often materials in transit or stored off site, against things like fire, wind, theft, and vandalism.
- It is usually written for the project term and ends when the work is complete and the building is occupied or accepted.
- Who pays for it (owner or contractor) should be spelled out in the contract before work begins.
A half-finished building is one of the most exposed things on a job site — open framing, materials stacked on the ground, expensive equipment, and no one there overnight. If a fire or a windstorm hits before the project is done, a normal insurance policy usually will not cover it. That is exactly what builder’s risk insurance is for. Here’s who needs it, what it covers, and how it works.
What builder’s risk insurance is
Builder’s risk, sometimes called “course of construction” coverage, protects a structure while it is under construction or renovation. Think of it as property insurance for a building that is not finished yet. It covers the work in progress, and usually the materials and supplies waiting to become part of it, from the day ground breaks until the project is complete.
The gap it fills
Here is what surprises people: a standard commercial property policy generally covers finished, occupied buildings, and general liability covers injuries and damage you cause to others. Neither is designed to pay for a structure that is still going up. So if a building burns down at 70% complete, the owner and contractor can be left holding a very large loss with no coverage. Builder’s risk exists to close that specific gap during the riskiest phase of a project.
What it typically covers
- The structure itself while under construction, including labor and materials already installed.
- Materials and supplies on the job site waiting to be used.
- Often, materials in transit or stored off site, depending on the policy.
- Common causes of loss such as fire, lightning, wind, hail, theft, and vandalism.
Policies vary, and some perils (like flood or earthquake) may need to be added. It is worth reading what is and is not included before the first delivery shows up on site.
Who needs it, and who pays
Builder’s risk matters to everyone with money in the project: the property owner, the general contractor, and sometimes lenders, who often require it before releasing funds. The key question is who buys it. On some jobs the owner carries it; on others the contractor does. That should never be left vague. Spell it out in the contract before work starts, so there is no gap and no argument if something goes wrong.
How long it lasts
Builder’s risk is temporary by design. It is written for the length of the project and typically ends when construction is finished and the building is occupied or formally accepted. At that point, a standard commercial property policy takes over for the completed structure. Letting builder’s risk lapse before permanent coverage is in place is a common and costly mistake, so the handoff should be planned.
Frequently asked questions
What does builder’s risk insurance cover? It covers a building under construction or renovation, plus materials on site (and often in transit or stored off site), against causes of loss like fire, wind, theft, and vandalism. Some perils may need to be added.
Isn’t a building under construction covered by regular insurance? Generally no. Standard property policies cover finished buildings and general liability covers harm to others. Neither is built to cover a structure still under construction, which is the gap builder’s risk fills.
Who is responsible for builder’s risk, the owner or the contractor? Either can carry it, so it should be defined in the contract before work begins. Lenders often require it as well. The important thing is that someone clearly owns it.
How long does builder’s risk last? It is written for the project term and usually ends when construction is complete and the building is occupied or accepted, at which point a permanent property policy should take over.
Starting a project? Let’s cover it the right way
Before the next build breaks ground, make sure the structure is protected while it goes up. Call (801) 676-7101 or request a quote (https://www.wasatchpreferred.com/quotes/), and we’ll set up the right contractor coverage (https://www.wasatchpreferred.com/products/contractors-insurance/) for your project.
This article is general information only and is not insurance or legal advice. Coverage terms and exclusions vary by policy and situation — talk with a licensed agent about your specific project.