Builders risk insurance is a specialized property policy that covers a building or structure while it is under construction, renovation, or installation. It pays to repair or replace covered property — including materials on-site, in transit, and temporarily stored off-site — that is damaged by a covered peril such as fire, theft, vandalism, or wind. Coverage typically attaches when construction begins and expires at substantial completion.
Who this is for: General contractors, project owners, developers, subcontractors with an insurable interest, and lenders requiring coverage as a loan condition.
TL;DR — Key Takeaways
- Builders risk covers the structure under construction and materials against sudden physical loss; it does NOT replace general liability or workers compensation.
- Policies are typically written on an "all-risk" (open-perils) basis, meaning all causes of loss are covered unless specifically excluded.
- Common exclusions include faulty workmanship, earthquake, flood (available by endorsement), employee theft, and mechanical breakdown.
- Cost typically runs 1%–4% of total construction value annually, depending on project type, location, and construction materials.
- Coverage can be placed by the owner (Owner-Controlled) or contractor (Contractor-Controlled) — the contract dictates which party buys it.
What Does Builders Risk Insurance Cover?
Builders risk is a first-party inland marine policy. It insures the insured project (the structure being built) and, by extension, materials and supplies that are part of that project.
Covered property (standard form)
- The building or structure under construction, including foundations, permanent fixtures, and in-place installations
- Materials, equipment, and supplies on-site intended to become part of the completed structure
- Materials in transit to the job site (typically within 100 miles, but varies by policy)
- Materials stored temporarily off-site at a scheduled location
Covered perils (open-perils / "all-risk" form)
- Fire, lightning, explosion
- Windstorm, hail
- Theft and vandalism
- Water damage from sudden and accidental discharge (not flood)
- Collapse during construction
- Accidental damage during testing (with endorsement)
What Builders Risk Does NOT Cover
| Exclusion | Notes |
|---|---|
| Faulty workmanship, design, or materials | The defective work itself; resulting damage may be covered depending on policy wording |
| Earthquake | Available by endorsement in most states |
| Flood | Available by endorsement or separate NFIP/private flood policy |
| Employee theft | Requires Crime coverage |
| Contractor's tools and equipment | Covered under Inland Marine / Installation Floater |
| Third-party bodily injury or property damage | Covered under General Liability (GL) |
| Workers compensation | Separate statutory coverage |
| Delay in completion / lost revenue | Covered under Soft Costs / Loss of Rents endorsement |
How Much Does Builders Risk Insurance Cost?
Premium is calculated as a percentage of the completed value (hard costs) of the project. Soft costs (architecture, engineering, financing fees) may be added by endorsement.
Typical Cost Ranges by Project Type
| Project Type | Estimated Rate (% of project value) | Example: $2M Project |
|---|---|---|
| Wood-frame residential | 1.5%–3.5% | $30,000–$70,000/year |
| Commercial masonry / concrete | 0.75%–2.0% | $15,000–$40,000/year |
| Steel-frame commercial | 0.75%–1.75% | $15,000–$35,000/year |
| Renovation / remodel (occupied) | 2.0%–4.5% | $40,000–$90,000/year |
| Infrastructure / civil | 0.50%–1.50% | $10,000–$30,000/year |
Note: Rates shown are illustrative industry ranges and are not a quote. Your actual premium will depend on location, construction type, project duration, deductibles, carrier, and other underwriting factors.
Key Rating Factors
- Total insured value (TIV) — the completed replacement cost of the structure plus covered soft costs
- Construction type — frame, joisted masonry, non-combustible, fire-resistive (ISO Class 1–6)
- Project duration — longer projects carry more exposure; policies can be written for 6–36 months
- Occupancy risk — renovation of an occupied building is rated higher than new ground-up construction
- Location — hurricane zones (Gulf Coast, Southeast Atlantic), wildfire-prone areas, and high-crime ZIP codes add surcharge
- Deductible — standard deductibles range from $2,500 to $25,000; wind/hail and theft may carry separate percentage deductibles
How to Get a Builders Risk Policy in 5 Steps
- Determine who is responsible. Review the construction contract — the AIA A201 General Conditions (Article 11) typically assigns builders risk to the Owner; other contracts may place it on the GC. Whoever the contract designates should purchase the policy.
- Assemble project information. Gather: property address, total project value (hard costs + soft costs), construction type, start date, expected completion date, and names of all named insureds (owner, GC, lender).
- Choose the right limit. Insure to 100% of the completed value including materials, fixtures, and applicable soft costs. Underinsuring triggers coinsurance penalties on claims.
- Select coverage options. Decide which endorsements you need: flood, earthquake, soft costs / delay in opening, testing and commissioning, and transit extension.
- Bind and furnish certificates. Once the carrier binds coverage, request Certificates of Insurance (COIs) for lenders, architects, and any additional insureds listed in the contract.
ACV vs. Replacement Cost — Which Applies on a Builders Risk Policy?
Most builders risk policies pay on a replacement cost value (RCV) basis for materials and the partially completed structure. Actual cash value (ACV) policies exist but are uncommon in the commercial segment. Confirm the valuation clause before binding — a claim settlement on an ACV policy will deduct depreciation from an unfinished structure, which can leave a significant coverage gap.
Real-World Example: Mixed-Use Development, Austin, TX
Project: A developer breaks ground on a 24-unit mixed-use building — 4,000 sq ft retail on the ground floor, 20 residential units above. Wood-frame construction over a concrete podium. Total hard cost: $3.8 million. Estimated soft costs (architecture, engineering, financing): $420,000. Total insured value: $4.22 million. Expected completion: 18 months.
Policy structure (illustrative): - Named insureds: developer (owner), general contractor, construction lender - Policy limit: $4,220,000 (replacement cost) - Policy term: 18 months - Deductible: $10,000 AOP; $25,000 wind/hail (separate) - Endorsements added: flood (the site is Zone AE), soft costs / delay in opening ($200,000 sublimit), transit extension 250 miles
Illustrative premium: At a blended rate of approximately 2.2% on the TIV for an 18-month term, the estimated annual-equivalent premium would be roughly $74,000–$92,000 for the full policy term. The lender required to be named as loss payee and required evidence of flood endorsement before disbursing funds.
Claim scenario: During framing, an accidental fire on the 3rd floor damages 11 completed structural bays. Damage is assessed at $380,000 replacement cost. After the $10,000 deductible, the policy pays $370,000, allowing work to resume within 6 weeks.
This is an illustrative example. Actual premiums and claim outcomes vary by carrier, underwriting, and project specifics.
Who Needs to Be Named on a Builders Risk Policy?
The policy should name every party with an insurable interest in the project:
- Owner / developer — primary named insured if owner-placed
- General contractor — named insured or additional insured, depending on who buys the policy
- Construction lender / mortgagee — listed as loss payee (receives claim payments jointly)
- Subcontractors — frequently added as additional insureds; confirm with your contract
- Architect / engineer — typically covered for their professional work only under professional liability, NOT builders risk
Builders Risk vs. General Liability vs. Inland Marine
| Coverage | What It Protects | Who Pays the Claim |
|---|---|---|
| Builders Risk | The building/materials under construction | First-party (your property) |
| General Liability | Third-party bodily injury or property damage you cause | Third-party (claims against you) |
| Inland Marine / Tools Floater | Contractor's own tools and equipment | First-party (your equipment) |
| Installation Floater | Materials being installed by a contractor until installation complete | First-party (contractor's interest) |
| Commercial Auto | Vehicles transporting materials or workers | First-party + liability |
A complete construction insurance program typically includes all five of the above categories.
FAQ — Builders Risk Insurance
Does builders risk cover damage caused by the contractor's own workers?
Generally yes — accidental physical damage to the covered structure caused by workers on-site is a covered peril under most open-perils forms. However, the faulty workmanship exclusion bars coverage for the defective work itself; coverage applies to resulting damage to other parts of the structure. Review the "ensuing loss" clause carefully.
Can builders risk be transferred or assigned mid-project?
Coverage cannot typically be assigned without carrier consent. If ownership of the project transfers mid-construction, the new owner must be endorsed onto the policy or obtain a new policy. Notify your broker immediately on any ownership change to avoid a coverage gap.
What happens when construction is complete?
Builders risk coverage ceases at substantial completion (or policy expiration, whichever comes first). At that point, the property must be transitioned to a permanent commercial property policy. Failure to convert coverage promptly can leave the completed structure uninsured. Some policies include a 30–60-day post-completion grace period; confirm the specific language with your carrier.
Is builders risk required by law?
No state statute universally mandates builders risk insurance. However, construction loan agreements, project owner contracts (such as AIA A201 Article 11), and municipal building permits may all impose it as a contractual or lender condition. In practice, nearly all lender-financed projects require it.
Does builders risk cover flood?
Standard builders risk forms exclude flood as a named exclusion. Coverage is available by endorsement from admitted or surplus lines carriers. Properties in FEMA Special Flood Hazard Areas (Zone A or AE) may also be eligible for National Flood Insurance Program (NFIP) coverage. Flood endorsement premiums vary significantly by flood zone. [Verify flood zone designation with FEMA's Flood Map Service Center before binding.]
How is the limit set on a builders risk policy?
The limit should equal the completed replacement cost value of the project — including all labor, materials, and overhead to finish the structure — plus any soft costs endorsed onto the policy. Do not insure to the land value or current market value. Underinsurance at the time of loss may trigger a coinsurance provision, resulting in a reduced claim payment.
Does one builders risk policy cover multiple projects?
Yes — blanket builders risk or "reporting form" policies are available for contractors or developers with multiple simultaneous projects. The insured reports each new project to the carrier (often monthly), and premium is adjusted accordingly. This is more efficient than placing a separate policy on every project.
Who keeps the insurance if the GC and owner have a dispute?
The policy belongs to the named insured. Disputes do not automatically void coverage. However, both parties should be named insureds to avoid one party's interest being unprotected during litigation. A well-drafted construction contract addresses this scenario explicitly.
Why Choose Morrow for Builders Risk Insurance?
-
Independent agency — multiple carrier relationships. Morrow places builders risk with admitted carriers and specialized surplus lines markets, meaning we shop your project across multiple underwriters to find the best combination of coverage terms and price — not just the one carrier a captive agent represents.
-
Construction-fluent coverage review. We read AIA contracts, construction loan requirements, and subcontract insurance schedules to confirm your policy is structured correctly — right named insureds, correct limit, and endorsements the contract actually requires.
-
Fast COI and additional insured turnaround. Construction timelines don't pause for paperwork. Morrow issues certificates and additional insured endorsements the same business day in most cases, keeping your project on schedule and your lender satisfied.
-
Access to specialty markets for hard-to-place projects. Wood-frame multi-family, occupied renovations, coastal construction, and large-scale infrastructure can be difficult to place in standard markets. Our surplus lines access means we can find coverage even for complex or high-value projects.
-
Real claims advocacy. If you have a loss, Morrow works alongside you — coordinating with the adjuster, documenting replacement cost, and pushing for a fair and timely settlement. We are not neutral; we represent your interests.
[Morrow to confirm: licensed states, carrier panel, NPN, and physical office location]
Get a Builders Risk Quote
Ready to protect your project from day one?
Request a Builders Risk Quote → | Call Morrow: [phone number]
Trust strip: Morrow (Afthonea Inc, DBA Morrow) is an independent commercial insurance agency licensed in [states — Morrow to confirm]. We work with A-rated admitted and surplus lines carriers. [X] Google reviews averaging [X]/5.
Related Pages
- Commercial Insurance Overview — parent pillar
- General Liability Insurance for Contractors
- Commercial Property Insurance
- Inland Marine & Installation Floater
- Construction Insurance Cost Guide
- Contractors Insurance
- Glossary: Replacement Cost Value vs. ACV
Author: Written by the Morrow Commercial Insurance Editorial Team, reviewed for accuracy by a licensed P&C insurance professional. Published: June 2026 Last updated: June 2026
Sources consulted: - Insurance Services Office (ISO) Builders Risk Coverage Form CP 00 20 - American Institute of Architects (AIA) A201 General Conditions of the Contract for Construction, Article 11 - Insurance Information Institute (III) — "Builders Risk Insurance" - National Association of Insurance Commissioners (NAIC) — Property & Casualty Market Report - Federal Emergency Management Agency (FEMA) — Flood Map Service Center (msc.fema.gov) - National Flood Insurance Program (NFIP) — Policy forms and coverage guides - State insurance department bulletins (consult your state DOI for jurisdiction-specific requirements)