What is Builder’s Risk Insurance and How Much Does It Cost?
Every construction project faces risks, from fire and theft to severe weather and vandalism. Even with strong safety protocols, accidents and unexpected losses can derail your timeline and your bottom line.
That’s why Builder’s Risk Insurance, also known as Course of Construction Insurance, is essential for any project under construction. It protects your materials, labor, and investments from damage or loss before a job is completed.
In this guide, we’ll explain what builder’s risk insurance covers, who needs it, and how much it typically costs, so you can keep your projects protected and on schedule.
What is Builder’s Risk Insurance?
Builder’s risk insurance is a specialized type of property insurance that protects buildings and materials during construction or renovation. It covers damage or loss to the structure, equipment, and materials from specific events like:
- Fire
- Theft
- Vandalism
- Hail, wind, or lightning
- Explosion or vehicle impact
It’s sometimes referred to as “course of construction” insurance because coverage begins when work starts and ends once the project is completed or occupied.
Who needs it:
- General contractors
- Developers and property owners
- Subcontractors (when required by contract)
- House flippers or remodelers
Essentially, anyone with a financial interest in a construction project can (and should) carry a builder’s risk policy.
What Does Builder’s Risk Insurance Cover?
A comprehensive builder’s risk policy typically includes coverage for:
1. The Building Under Construction
- Covers the structure itself, whether it’s new construction, a renovation, or an addition.
- Example: A fire damages part of the framing during construction. Builder’s risk pays for the materials and labor needed for repairs.
2. Materials and Supplies
- Protects building materials on-site, in storage, or in transit to the job site.
- Example: Copper piping stored in a locked trailer is stolen overnight. Builder’s risk covers the cost of replacement.
3. Temporary Structures
- Includes scaffolding, fencing, and temporary storage sheds.
4. Debris Removal
- Pays to remove debris after a covered loss, such as fire or storm damage.
5. Soft Costs (Optional Add-On)
- Soft costs are non-physical expenses that result from project delays due to a covered loss, such as:
- Lost income or rent
- Interest on construction loans
- Permit and architectural fees
Adding soft cost coverage helps reduce financial strain when delays occur.
What Does Builder’s Risk Insurance NOT Cover?
It’s important to know what’s excluded so there are no surprises:
- Employee injuries (covered by workers’ comp)
- Faulty workmanship or design defects
- Normal wear and tear
- Damage after project completion or occupancy
- Tools and contractor equipment (covered by inland marine)
- Flood or earthquake (may require separate policies)
Builder’s risk focuses on physical damage to the project, not liability or injury-related claims.
Why Do Contractors and Developers Need Builder’s Risk Insurance?
It Protects Your Investment
- From materials and labor to permits and plans, every dollar spent on a project is at risk until completion. Builder’s risk ensures you don’t lose that investment if disaster strikes mid-project.
It Keeps Projects on Schedule
- Recovering from a loss without insurance can halt progress for months. With builder’s risk coverage, funds are available to repair damage and get back on track quickly.
It’s Often Required
- Many lenders, investors, and project owners require builder’s risk insurance as a condition of financing or contract approval. Having it in place demonstrates professionalism and financial responsibility.
How Much Does Builder’s Risk Insurance Cost?
The cost of builder’s risk insurance depends on several factors, including:
- Project type (residential, commercial, renovation, or new build)
- Project value (total completed cost)
- Location and risk exposure
- Duration of construction
- Coverage limits and deductibles
- Safety and loss prevention measures
Average Cost Range
- Most builder’s risk policies cost between 1% and 4% of the total construction budget.
Example:
- $250,000 home build → $2,500–$10,000 total premium
- $1 million commercial project → $10,000–$40,000 total premium
Who Pays for Builder’s Risk Insurance?
The responsible party depends on contract terms. Typically:
- General Contractors buy coverage for the project as part of their agreement.
- Property Owners or Developers may purchase it when financing a project.
- Subcontractors may need to be listed as additional insureds.
In most cases, the party with the largest financial stake in the project should carry the policy.
Builder’s Risk vs. General Liability: What’s the Difference?
These two coverages work together, but they protect against different types of risks:
| Coverage Type | Protects Against | Who/What It Covers |
| Builder’s Risk Insurance | Damage to the structure, materials, or equipment | The project and property |
| General Liability Insurance | Third-party injuries or property damage | Other people or property |
A complete insurance program for contractors should include both.
How to Get Builder’s Risk Insurance for Your Next Project
Here’s what to have ready before requesting a quote:
- Project details (type, size, location, total value)
- Estimated start and completion dates
- Names of all parties with an insurable interest
- Details of any financing or lender requirements
- Safety or risk mitigation plans
Working with an agency like Dependable Partners that specializes in contractor insurance ensures you get tailored coverage at a competitive rate.
Real-World Example: How Builder’s Risk Saved a Contractor
A general contractor in Georgia was halfway through a $600,000 residential project when a lightning storm caused a fire, destroying part of the structure.
The builder’s risk policy paid for:
- $120,000 in material replacement
- $30,000 in debris removal
- Additional expenses for project delays
Without that coverage, the contractor would have faced a devastating financial loss.
Secure Every Construction Project with Builder’s Risk Coverage
Construction projects don’t always go as planned, but with the right insurance, you can ensure one setback doesn’t threaten your success.
Builder’s risk insurance protects your investment, keeps projects on schedule, and satisfies lender and client requirements. It’s one of the smartest safeguards a contractor or developer can have in place.
Don’t start your next project unprotected.
