What Does Builder’s Risk Insurance Cover? (And What It Doesn’t)
Builder’s Risk Insurance: Coverage and Common Pitfalls
Builder’s risk insurance is one of the most misunderstood coverages in construction. Many contractors and owners assume it’s a one-size-fits-all policy. It’s not.
Let’s break down what it typically does cover—and what it doesn’t.
What Builder’s Risk Usually Covers
At its core, builder’s risk insurance protects against direct physical loss or damage to:
The structure under construction
Temporary structures (like scaffolding or forms)
Materials, fixtures, and equipment to be installed
Materials in transit or stored off-site (if included)
Most builder’s risk policies are written on an “Special” basis, meaning they cover any loss that’s not specifically excluded.
Common Exclusions
Despite being broad, builder’s risk doesn’t cover everything. Here are common exclusions you need to watch out for:
Faulty workmanship, design, or materials
Employee theft or intentional damage
Normal wear and tear
Acts of war or government action
Damage after project completion
Equipment breakdown
Earthquake and flood (unless added by endorsement)
Tip: Some exclusions can be negotiated or “given back” through endorsements—but only if you ask for them.
Policy Forms Are Not Standardized
One of the biggest misconceptions in the industry:
"Aren’t all builder’s risk policies basically the same?"
Nope. Unlike general liability or workers' comp, there’s no standardized form for builder’s risk.
Some carriers may loosely base their wording on templates—but most write their own proprietary policies. Coverage can vary dramatically.
That’s why it’s critical to:
Read the actual policy, not just the proposal
Work with a broker who understands construction exposures
Ask what’s included in writing—and what can be added
A Word About Soft Costs
Basic builder’s risk policies often don’t cover delay-related costs like:
Interest on construction loans
Lost rental income
Legal or permit fees due to a delay
To cover these, you may need additional coverage—often called:
Delay in Completion
Soft Costs
Delay in Opening
Advance Loss of Profits
Bottom Line: Review It Before You Rely on It
Builder’s risk can be a project-saver—or a false sense of security—depending on how it’s structured. Don’t assume the base policy protects everything you care about.
Identify the exposures
Review the policy form
Customize coverage where needed
Not sure if your current builder’s risk policy actually fits your project?
Let’s take a look before the shovel hits the ground—or worse, before a claim hits your bottom line.
