Builders risk insurance, explained plainly.

What builders risk insurance is

Builders risk is property insurance for a building that does not exist yet, or one that is being substantially rebuilt. From the day materials arrive on site until the project is finished and handed over, the structure and everything that will become part of it are exposed: a fire in a half-framed building, a windstorm that peels off sheathing, copper pipe stolen over a long weekend, a burst temporary line that floods a finished floor. Builders risk pays to repair or replace that work so the project can keep going.

It is easy to confuse with the other policies on a job, so it helps to be precise about what it is not:

• It is not liability insurance. If a worker falls or a neighbor's property is damaged, that is a general liability or workers' compensation claim. Builders risk covers the owner's and builders' own property interest in the project.
• It is not tools and equipment coverage. A contractor's excavator, scaffolding and hand tools are normally insured under a contractors equipment (inland marine) policy, not the builders risk.
• It is not a warranty. It responds to sudden, accidental physical loss. It does not pay to fix work that was simply built wrong.

The policy usually runs for the length of the project, often written for a set term such as six or twelve months with an option to extend. It ends when the building is completed, occupied, put to its intended use, or accepted by the owner, whichever the policy says comes first. That ending condition matters more than most people realise, and we come back to it below.

What it covers, and what it usually does not

Builders risk forms vary a great deal between insurers, so treat this as a map of the territory rather than a promise about any one policy.

Commonly covered:

• The structure under construction, including foundations, framing, walls, roof and permanently installed fixtures.
• Building materials and supplies on site that are intended to become part of the structure.
• Materials in transit to the site and, often with a lower sub-limit, materials stored at another location.
• Temporary structures such as scaffolding, forms and site fencing, when the policy includes them.
• Causes of loss such as fire, lightning, wind and hail, theft, vandalism, explosion and certain water damage.
• Optional add-ons: debris removal, soft costs (extra interest, financing, permit and design fees caused by a delay), and loss of rents or income when a covered loss pushes back the opening date.

Commonly excluded or limited:

• Faulty workmanship, materials or design. The cost to redo defective work itself is usually excluded. Many forms do cover resulting damage, for example a fire caused by a badly installed heater, but the wording varies and this is where many disputes start.
• Flood and earthquake. Often excluded or offered only as an add-on with its own deductible and limit. On coastal Long Island and low-lying parts of New York City, check this line first.
• Theft of materials not yet installed. Some policies cover it only if the materials are in a locked, secured area, or cap it with a sub-limit.
• Wear and tear, mechanical breakdown, mold, and gradual leaks. These are maintenance issues, not sudden accidents.
• Employee theft and mysterious disappearance. Missing materials with no evidence of a break-in are frequently excluded.
• The existing building on a renovation. Unless you specifically add it, a renovation builders risk may cover only the new work, leaving the existing structure to the owner's regular property policy.

Winter in New York is a recurring source of losses on open projects: freeze damage to temporary plumbing, wind-driven rain through incomplete envelopes, and heaters left running unattended. Insurers often attach protective safeguard conditions, such as requiring heat to be maintained or the site to be monitored, and failing to meet them can defeat a claim. Read those conditions with your site superintendent, not just your accountant.

Who buys it: owner or contractor

The short answer is whoever the contract says. There is no single rule, and both arrangements are common.

• The owner buys it. Many standard construction contract forms, including widely used AIA documents, assign the property insurance on the project to the owner unless the parties agree otherwise. Developers who build repeatedly often prefer to control the policy, its deductibles and its claims.
• The general contractor buys it. On smaller commercial projects and many residential builds, the GC carries it and includes the cost in the contract price. Contractors who build often may carry a reporting form that automatically picks up each new project.
• The lender requires it either way. On a financed project, the construction lender will want proof of builders risk naming it as a loss payee or mortgagee before the first draw.

Whoever buys the policy, the other parties with a financial stake should be named on it, and the contract usually requires a waiver of subrogation so the insurer does not turn around and sue a subcontractor whose work caused the loss. That interplay between the property policy and each party's liability insurance is the same kind of contract detail we discuss in our guide to Labor Law 240 and contractors insurance: the paperwork decides who pays long before anything goes wrong.

The single most common gap we see is the assumption that the other side has it covered. An owner thinks the GC bought it, the GC thinks the owner did, and nobody finds out until after the fire. Get the certificate or the declarations page, whichever side you are on.

How builders risk is priced

Most builders risk policies are rated on the completed value of the project: the full cost to build it, including labor and materials, usually excluding land and sometimes excluding site work. The insurer applies a rate to that value for the policy term. Because the value at risk starts near zero and grows as the project goes up, the completed-value approach averages the exposure over the job. A reporting form, used by builders with several projects at once, instead charges premium on values reported periodically.

As an illustration only, and not a quote, many projects we see land somewhere around 1 to 4 percent of the construction cost for a typical one-year term. Where a project falls in that range depends on:

1. Construction type. Wood frame burns and costs the most to insure. Masonry, steel and concrete rate lower.
2. Location. Coastal wind exposure, flood zones, and high-theft neighborhoods all add cost. A wind or named-storm deductible may be written as a percentage of value rather than a flat dollar amount.
3. Project size and schedule. Longer builds mean longer exposure. Extensions after the original term are priced separately.
4. Site security. Fencing, lighting, cameras, a monitored alarm or a watchman can earn a better rate, and in some cases are required.
5. The builder's experience and loss history. Underwriters want to know who is building it and how their past jobs went.
6. Deductibles and add-ons. A higher all-other-perils deductible lowers the premium; soft costs, delay in opening, flood and earthquake raise it.

Many policies carry a minimum premium regardless of project size, so very small jobs can look expensive as a percentage. That is one reason small renovations are often better handled another way.

When you do not need a separate builders risk policy

Builders risk is not automatic for every project, and buying it when another policy already responds wastes money. A separate policy may be unnecessary when:

• The work is a modest interior remodel of an occupied building and the owner's property or homeowners insurer confirms in writing that the work is covered. Ask specifically, because some property policies restrict coverage during renovation or while a building is vacant.
• You are a trade contractor installing your own materials on someone else's project. An installation floater, which covers your materials until they are installed and accepted, is often the right fit, and the owner or GC's builders risk may already include you.
• The project is already covered by a master policy carried by the owner, developer or GC. Your contract will say so, and you should get a copy of the evidence.

When in doubt, compare what the contract requires, what the lender requires, and what existing policies actually say. The answer should be in writing before the first delivery arrives.

How to get builders risk insurance

Builders risk is written by specialty property and construction insurers, usually through an agent or broker rather than direct. Online "instant" quotes exist for simple residential jobs, but anything with a lender, a general contractor agreement, or a New York City address will need an underwriter to see the details. To get a firm quote quickly, have this ready:

• The project: address, a short description, square footage and number of stories, and whether it is new construction, an addition or a renovation.
• Completed value: the full hard-cost budget, plus any soft costs you want covered (interest, fees, lost rents).
• Construction type: wood frame, joisted masonry, steel or concrete.
• Dates: start, expected completion, and whether any existing structure is part of the work.
• The parties: owner, general contractor, lender and anyone the contract says must be named on the policy.
• Site security: fencing, lighting, cameras, alarms or a watchman.

Bind it before materials arrive. Most insurers will not pick up a project already under way without an inspection, and some will not pick it up at all. In New York City, also check whether your contract or the lender requires specific limits for flood, windstorm or delay in opening, since those are often excluded or capped unless you ask for them.

IMD places builders risk alongside the rest of a contractor's program. See the contractors insurance page, or read how contractor general liability interacts with New York's Scaffold Law.

Before you bind: a short checklist

• Read the construction contract's insurance section and confirm who must buy builders risk and with what limits and named parties.
• Set the limit at the full completed value, plus soft costs if delay would be expensive.
• Check flood, earthquake and named-storm coverage and their deductibles against the site's actual exposure.
• Confirm theft coverage for unattached materials and what security the policy requires.
• For renovations, decide how the existing structure is covered.
• Note the ending conditions: occupancy, completion, or acceptance. Partial occupancy can end coverage early on part of the building.
• Calendar the expiration date and request an extension before it lapses if the schedule slips.
• Collect certificates showing the lender, owner and contractors are named as required.

IMD places builders risk for owners, developers and general contractors alongside the rest of a contractor's program, so the property policy, the GL and the umbrella are written to fit together. Start on our contractors insurance page or call (332) 333-2353.

Frequently asked questions

What does builders risk insurance cover?

The building under construction or renovation, materials on site, and often materials in transit or in storage, against causes such as fire, wind, theft and vandalism. It does not cover injuries to people; that is general liability and workers' compensation.

Who is responsible for buying it, the owner or the contractor?

Whoever the contract says. Many standard forms put it on the owner, but the parties often change that. Lenders on financed projects usually require it before funding, and every party with a financial interest should be named on the policy.

How much does builders risk insurance cost?

It is usually a rate applied to the completed value. As an illustration only, many projects land around 1 to 4 percent of construction cost for a one-year term, with wood frame, coastal sites, high-theft areas and long schedules at the high end.

How do I get builders risk insurance?

Through an agent or broker who writes construction risks, with the project address, completed value, construction type, dates, parties and site security plan in hand. Bind it before work starts.

Is builders risk an all-risk policy?

Usually yes, on a special or "all-risk" form that covers any direct physical loss not specifically excluded. Read the exclusions: faulty workmanship, wear and tear, mold, and often flood and earthquake unless added back.

Do I need it for a small renovation?

Not always. The owner's existing property policy or a contractor's installation floater may already respond. Get written confirmation from the property insurer before work starts.

This article is general information, not legal advice or an offer of coverage. Premium figures are illustrative ranges, not quotes; actual coverage and pricing depend on policy wording and underwriting.