Builders Risk Insurance: What It Covers

The Vulnerability of a Job Site

A building under construction is uniquely vulnerable. It doesn't have a roof to keep out the rain, it doesn't have locked doors to keep out thieves, and it doesn't have a fire suppression system installed yet. Standard commercial property insurance won't cover it. You need Builders Risk (also known as Course of Construction) insurance.

Who Buys It?

Either the property owner/developer or the General Contractor can purchase the policy. The construction contract should explicitly state who is responsible for securing it. Usually, the GC buys it and builds the premium into the project cost, ensuring they are the named insured and control the claims process.

What It Covers (Hard Costs)

A standard policy covers the "hard costs" of construction against perils like fire, wind, lightning, hail, theft, and vandalism. This includes:

• The structure itself (framing, foundation, roofing).
• Materials sitting on the job site waiting to be installed (lumber, drywall, copper pipe).
• Fixtures and appliances intended to become a permanent part of the building.

What Are "Soft Costs"?

If a fire burns down a nearly completed house, you don't just lose the lumber. You lose time. "Soft costs" coverage reimburses you for the financial impact of the delay. This can include:

• Additional interest on construction loans.
• Extended architectural and engineering fees.
• Additional permit fees and property taxes.
• Lost rental income or lost sales revenue due to the delay.

When Does Coverage End?

Builders Risk policies are temporary. Coverage typically ends when the building is occupied, when it is put to its intended use, or when the policy expires—whichever comes first. Once completed, the policy must be transitioned to standard property insurance.