Builder’s Risk Insurance Explained: What Homeowners & Contractors Need to Know

Insurance coverage, requirements, exclusions, limits, deductibles, and availability vary by insurer, policy, location, and individual circumstances. This article is for general educational purposes and does not replace your policy documents or professional insurance advice.

Building a new home or completing a major renovation involves risks that do not exist once a house is finished. A fire could damage unfinished framing. Expensive appliances could disappear from a job site. A severe storm could damage a partially completed roof.

Also called builders risk insurance or sometimes course of construction insurance, this coverage can be important for homeowners, contractors, developers, and real estate investors.

But who buys the policy? What does builder’s risk insurance cover? And does your contractor’s insurance already protect your house?

Here is what beginners should know.

Builder’s Risk Insurance in 60 Seconds

• What it is: Temporary property insurance for a building under construction or substantial renovation.
• Who may need it: Homeowners, builders, contractors, developers, and property investors.
• What it may cover: The structure, construction materials, fixtures, and certain losses caused by covered events.
• What it doesn't replace: General liability insurance, workers' compensation, or permanent homeowners insurance.
• When you need it: Coverage should generally be addressed before construction starts or materials arrive.
• When it ends: Builder’s risk coverage is temporary and may end after completion, occupancy, policy expiration, or another event specified by the policy.

What Does Builder’s Risk Insurance Cover?

The exact builder’s risk insurance coverage depends on the insurer and policy. Coverage may include:

• The structure under construction
• Building materials
• Fixtures awaiting installation
• Materials temporarily stored on-site
• Certain materials stored off-site
• Certain materials in transit
• Equipment intended to become a permanent part of the building

Policies may protect against certain losses caused by fire, theft, vandalism, lightning, wind, hail, or other covered events.

For example, imagine a contractor has $18,000 of cabinets, flooring, and appliances waiting to be installed. They are stolen overnight. A builder’s risk policy may cover the loss if theft and those materials are covered under that particular policy.

Homeowners should also understand that insurers evaluate properties and risks differently. Learning why insurance companies inspect homes and what they look for can provide additional insight into how property condition can affect insurance decisions.

What Does Builder’s Risk Insurance Not Cover?

Builder’s risk insurance does not cover everything that can happen during construction.

Depending on the policy, exclusions or limitations may involve:

• Faulty workmanship
• Defective design
• Normal wear and tear
• Employee theft
• Mechanical breakdown
• Contractual disputes
• Flooding
• Earth movement
• Certain weather events

Construction quality is particularly important. Builder’s risk insurance should not be treated as a warranty against poor work. That issue can remain important long after construction ends, particularly when evaluating the risks and warning signs associated with buying a flipped house.

Always read the actual policy because exclusions, deductibles, limits, and optional coverages vary.

Builder’s Risk vs. Homeowners Insurance

These policies serve different purposes.

A standard homeowners policy should not automatically be assumed to cover every risk created by major construction.

Homeowners should notify their insurer before substantial work begins. Major changes in occupancy, condition, or risk can affect insurance. It is also helpful to understand why homeowners insurance companies cancel policies and what homeowners can do next.

Builder’s Risk vs. General Liability Insurance

Another common misconception is that builder’s risk insurance and contractor general liability insurance provide the same protection.

They do not.

Builder’s risk generally focuses on physical loss or damage to the insured construction project and covered property.

General liability insurance generally addresses certain claims involving bodily injury or property damage for which the insured is legally responsible.

For example, storm damage to framing could potentially involve builder’s risk. If a visitor alleges that a contractor's negligence caused an injury at the construction site, that could instead involve liability insurance.

A construction project may require several types of insurance because no single policy protects against every risk.

Does My Contractor’s Insurance Cover My House?

Do not assume it does.

A contractor may carry general liability, workers' compensation, commercial auto, and other insurance, but those policies do not necessarily provide complete property coverage for your home under construction.

This is why homeowners should determine before construction starts who is responsible for purchasing builder’s risk insurance.

The construction contract may assign that responsibility to the homeowner, contractor, developer, or another party.

Who Actually Buys Builder’s Risk Insurance?

There is no universal answer. Depending on the project and contract, the policy could be purchased by:

• Property owner
• Homeowner
• General contractor
• Builder
• Developer

More than one party can have a financial interest—or insurable interest—in the same project.

For example, a homeowner may have invested significant cash while a contractor has labor and materials tied up in the project. The important questions are who is insured, what property is covered, and who is responsible for obtaining coverage.

Get those answers in writing.

Is Builder’s Risk Insurance Required?

Builder’s risk insurance is not universally required for every construction project. However, a construction lender may require insurance as a condition of financing, and a construction contract may also specify insurance requirements.

If you are using a construction loan, ask the lender about its insurance requirements well before closing or construction begins.

How Much Does Builder’s Risk Insurance Cost?

There is no universal builder’s risk insurance cost. Pricing may depend on:

• Completed project value
• Location
• Construction type
• Project duration
• Building materials
• Coverage limits
• Deductible
• Security measures
• Weather exposure
• Optional coverage

Once construction ends, different factors can determine the cost of permanent coverage. Homeowners can learn more about how homeowners insurance rates are calculated when planning for insurance on the finished home.

Builder’s Risk Insurance for Renovations

Builder’s risk insurance isn't only for new construction. It may also be appropriate for major remodels, additions, structural alterations, and extensive rehabilitation projects.

Before beginning significant work, understand how home renovations can affect your home insurance. Never assume an existing homeowners policy will automatically provide the coverage needed throughout a major renovation.

Renovating an older property may also involve replacing roofing, HVAC, plumbing, or electrical components. Understanding how long major home systems typically last can help homeowners anticipate which components may become part of a larger renovation.

Builder’s Risk Insurance for Real Estate Investors

Investors should pay particular attention to insurance during major rehabilitation projects.

Before renovating a rental, creating a realistic construction budget and learning how to estimate repair costs on a potential rental property can help establish the project's scope and anticipated completed value.

Insurance can also become important for investors using the BRRRR method to buy, renovate, rent, refinance, and repeat. During the renovation stage, the property may be vacant and undergoing substantial construction, creating different insurance considerations than an occupied rental.

Builder’s Risk Insurance in South Carolina

For homeowners and contractors seeking builder’s risk insurance in South Carolina, location-specific risks should be considered.

South Carolina construction projects can experience thunderstorms, strong winds, hail, tropical systems, and heavy rainfall. However, never assume every weather-related event is automatically covered. Flood, named-storm, wind, and other coverage can vary considerably by policy and property location.

Whether you're building in Greenville, Spartanburg, Anderson, Columbia, Charleston, or elsewhere in South Carolina, discuss the property's specific exposures with an insurance professional.

When Should Builder’s Risk Insurance Start and End?

Insurance responsibilities should ideally be established before construction begins or valuable materials arrive at the job site.

Coverage is temporary. Depending on the policy, it may terminate because of:

• Construction completion
• Occupancy
• Sale of the property
• Policy expiration
• Another event specified by the policy

If construction runs behind schedule, do not assume insurance automatically extends. Contact the insurer before the policy expires.

Similarly, homeowners should not assume they can simply move into the property while builder’s risk coverage continues unchanged. Coordinate the transition from construction insurance to permanent homeowners insurance before occupancy.

Common Builder’s Risk Insurance Mistakes

Avoid these common mistakes:

• Assuming the contractor's insurance covers everything
• Beginning construction before confirming coverage
• Underestimating the project's completed value
• Forgetting about materials stored off-site
• Assuming materials in transit are automatically covered
• Allowing coverage to expire during construction delays
• Assuming flood or every weather event is covered
• Moving into the property without discussing coverage changes

Do I Need Builder’s Risk Insurance?

Consider speaking with an insurance professional if you are:

• Building a new home
• Constructing a custom home
• Adding a major addition
• Gut-renovating a house
• Rehabilitating an investment property
• Making major structural changes
• Keeping substantial building materials at a construction site

The appropriate insurance depends on the project, contract, lender requirements, existing policies, and property.

Questions to Ask Your Insurance Agent

Before construction begins, ask:

1. Who should purchase the builder’s risk policy?
2. Who needs to be listed on it?
3. What is the appropriate coverage limit?
4. Is theft covered?
5. Are materials in transit covered?
6. Are off-site materials covered?
7. Which weather events are covered?
8. What exclusions apply?
9. What is the deductible?
10. When does coverage end?
11. What happens if construction is delayed?
12. When should permanent property insurance begin?

The Bottom Line

Builder’s risk insurance provides temporary property protection for certain risks while a building is under construction or undergoing substantial renovation. Homeowners should not assume their contractor's insurance covers the entire project, and contractors should not assume the homeowner has appropriate construction coverage.

Before work begins, establish who is responsible for the policy, what is covered, what is excluded, and when coverage starts and ends.

If you're building, renovating, or managing a construction project, Bluefield Insurance Group can help homeowners and contractors evaluate available insurance options and identify potential coverage gaps before construction begins.