Builders Risk Insurance - What It Covers, What It Costs, and When You Need It

What Is Builders Risk Insurance?

Builders risk insurance is a temporary property policy that covers a building during the construction phase. It protects against physical damage to the structure, the materials on site, materials in transit to the site, and in many cases temporary structures like scaffolding and construction fencing.

This is not a permanent policy. It starts when construction begins and ends when the building receives its certificate of occupancy, the owner takes possession, or the policy term expires - whichever comes first. Most policies are written for 6, 12, or 18 months depending on the project timeline.

Builders risk can be purchased by the property owner, the general contractor, or the lender. Who buys it depends on what the construction contract says. On most commercial projects, the contract specifies which party is responsible for carrying the policy and who gets named as an insured.

The key thing to understand: builders risk covers the building and materials. It does not cover your liability if someone gets hurt on site (that is your general liability), and it does not cover your tools and equipment (that is inland marine). Builders risk is strictly about protecting the value of the construction work itself.

Who Needs Builders Risk?

General contractors on new construction projects. If you are building a structure from the ground up - commercial, residential, or industrial - the project needs builders risk. On public works and bonded projects, your surety may want to see builders risk in place before issuing performance bonds on certain jobs. It is part of the overall project insurance program.

Property owners and developers. If you own the dirt and you are paying for the building, you have the most to lose if a fire or windstorm damages the structure mid-construction. Many developers carry their own builders risk policy and name the GC and major subcontractors as additional insureds.

Lenders. Construction lenders almost always require builders risk as a condition of the construction loan. They are funding the project and they need to know the collateral is protected. If you are financing construction, expect your lender to require proof of builders risk before the first draw.

Subcontractors. Subs typically do not buy their own builders risk - the GC's or owner's policy usually covers the full project. But check your subcontract. Some sub agreements require the sub to carry their own builders risk for their scope of work, especially on larger projects.

Homeowners doing major renovations. If you are spending $50,000 or more on a renovation that significantly alters the structure of your home, your standard homeowners policy may not cover the work in progress. A standalone builders risk policy is the safer play for any substantial renovation project.

Who Buys the Policy: Owner vs Contractor

Builders risk can be written three ways, and the right structure depends on the project type, the contract, and who has the most financial exposure to a construction loss.

Owner-Controlled Insurance Program (OCIP)

On an OCIP, the project owner buys the builders risk policy and names the general contractor, subcontractors, and lenders as additional insureds. OCIPs are the standard structure on large commercial and public works projects where the owner wants a single consolidated policy for the whole site. The owner controls the deductible, the limits, and the carrier selection. The GC and subs do not need to carry separate builders risk for the project, which simplifies their insurance program and often lowers their own premium costs.

Contractor-Controlled Insurance Program (CCIP)

On a CCIP, the general contractor buys the policy and names the owner, subs, and lenders as additional insureds. CCIPs are common on design-build projects where the GC is driving the schedule and the risk, or on projects where the owner prefers to transfer the insurance obligation to the contractor. The GC controls policy terms and absorbs the premium cost into the project budget.

Project-Specific Policies

On smaller projects, residential custom builds, and most renovations, the party identified in the contract simply buys a project-specific builders risk policy. There is no "program" structure. The policy covers that one job for the agreed term, and it ends when the project does. This is how most of our contractor clients buy builders risk, because most of them are not running billion-dollar OCIP programs.

Reading the Contract First

Before any party buys builders risk, read the construction contract. AIA A201 and ConsensusDocs 200 both default to owner-furnished builders risk unless the parties strike that language. Design-build and EPC contracts often shift the obligation to the contractor. Private negotiated contracts can put it anywhere. If the contract is silent, the party with the most financial exposure - usually the owner - should carry it, but a silent contract is a signal to clarify in writing before groundbreaking, not after a loss.

Condo and HOA Projects

Condo construction has its own wrinkle. State condo statutes vary, but as a general rule the developer carries builders risk through construction and the sales period, with the policy transitioning to a master HOA property policy at a defined milestone - commonly a specified percentage of units sold or the issuance of a certificate of occupancy on the final building. Both the trigger and the handoff mechanics vary by state, so confirm the specific transition requirement with your builders risk carrier and the HOA's property carrier in writing before groundbreaking. Missing the transition date is one of the most expensive mistakes in condo development.

State condo statutes change; the above reflects general market practice as of 2026 and is not a substitute for state-specific legal or coverage advice.

What Builders Risk Covers (and What It Does Not)

What It Covers

• The structure under construction. The building itself, including foundations, framing, roofing, and all installed components from groundbreaking through completion.
• Building materials on site. Lumber, steel, concrete, drywall, fixtures, and other materials stored at the job site waiting to be installed.
• Materials in transit. Materials being shipped to the job site are covered while in transit - important when you have expensive materials coming from suppliers or fabricators.
• Temporary structures. Scaffolding, construction fencing, temporary office trailers, and similar structures on the project site.
• Soft costs. Some policies include coverage for architect and engineering fees, permit costs, loan interest, and other indirect costs you incur if the project is delayed by a covered loss. Soft cost coverage is not automatic on every policy - it is typically added as an endorsement, and it is worth adding on larger projects where delay costs add up fast.

What It Does Not Cover

• Faulty workmanship. If a subcontractor installs something incorrectly, fixing the defective work itself is not a builders risk claim. However, if faulty workmanship causes resulting damage to other parts of the structure (a bad plumbing install causes water damage to finished drywall), that resulting damage may be covered depending on the policy form.
• Employee tools and equipment. Workers' personal tools and contractor-owned equipment like excavators, generators, and power tools are not covered under builders risk. That exposure belongs on your inland marine policy.
• Bodily injury and liability. If someone gets hurt on the job site, that is a general liability or workers compensation claim - not builders risk.
• Earthquake and flood. Most standard builders risk policies exclude earthquake and flood damage. Both can be added by endorsement in most markets, but they come with additional premium and higher deductibles - especially in high-risk zones.
• Existing structures. If you are renovating an existing building, the original structure is typically covered by the owner's permanent property policy. Builders risk covers the new construction work and materials being added. Some policies can be written to include the existing structure - ask your agent about the right setup.

Common Coverage Gaps That Cost Contractors Money

Most builders risk claims that get partially paid or denied come down to the same handful of gaps. The specific numbers vary by carrier and market cycle, but the patterns below generally hold true across the 2026 market. Here is what to check before you bind.

Named-Storm and Wind-Hail Deductibles

In Florida, the Gulf Coast, the Carolinas, and parts of the Northeast, standard builders risk policies carry a separate deductible for named-storm damage. The deductible generally runs as a percentage of the total insured value rather than a flat dollar amount, and the range in the current market is typically in the low single digits - a few percent of TIV is common. On a multimillion-dollar project that translates to a six-figure out-of-pocket exposure before coverage kicks in. The same pattern applies to wind-hail in the Texas and Oklahoma hail belt. Review the deductible structure line by line before you sign the policy, not after a hurricane watch is issued.

Delay in Opening (DIO) Coverage

Soft cost coverage pays for architect fees, loan interest, and permits if a covered loss delays the project. Delay in Opening coverage goes further - it pays for lost rental income, lost revenue, and continuing operating expenses that start on the originally scheduled completion date and run until the actual completion date. Standard builders risk policies generally do not include DIO. On any project where revenue depends on an opening date - hotels, retail, multifamily, mixed-use - DIO is a must-have endorsement, and the sub-limit should match your lender's debt service requirements, not a token amount.

Cold Testing and Commissioning

Many builders risk policies cover testing of newly installed systems only up to the point of first use. If a boiler, chiller, generator, or electrical system fails during commissioning - a very high-exposure period - the loss can fall into a gap between builders risk (which ended at first use) and the owner's permanent property policy (which has not started yet). An extended testing or commissioning endorsement closes that gap. Any project with significant mechanical, electrical, or process equipment should carry it.

Tool and Equipment Theft at Off-Site Storage

Builders risk covers materials at the job site and in transit. It generally does not cover contractor-owned tools, equipment, or materials stored off-site at your yard or a third-party warehouse. That is an inland marine exposure. The gap bites hardest on fit-out and specialty trade work where expensive packaged materials sit at a staging yard for weeks before installation.

Materials-in-Transit Sub-Limits

Materials in transit are covered under most builders risk policies, but there is often a per-shipment sub-limit. If you are shipping a six- or seven-figure custom-fabricated steel order or a major piece of mechanical equipment, confirm the per-shipment and per-loss sub-limits match the exposure. If they do not, a cargo policy or a transit endorsement with a higher limit is cheaper than finding out after the truck rolls.

Equipment Breakdown During Construction

Equipment breakdown - think boiler explosion, electrical arc, pressure vessel failure - is excluded from most builders risk policies. Once the equipment is being tested or commissioned, that exposure is live. An equipment breakdown endorsement on the builders risk (or a standalone boiler and machinery policy) protects installed systems during the testing phase before the permanent policy takes over.

How Much Does Builders Risk Insurance Cost? 2026 Rate Ranges

Builders risk premiums are quoted as a percentage of the total construction value. The typical range for most projects sits between 0.75% and 2% of the project value in the current market, but on a national basis the real answer is "it depends on data a static page cannot see." The honest version:

• ISO Protection Class of the specific job site - a Class 1 or 2 (hydrant and professional fire department within 5 road miles) prices very differently from a Class 9 or 10 (rural, no hydrant, long response time).
• Wildfire exposure score on the parcel - many Western carriers now underwrite by individual property wildfire score, not just zip code. Two addresses a mile apart can rate very differently.
• Carrier appetite in that specific geography - markets shift year to year. A carrier that was aggressive on coastal Texas or wildland-urban-interface California twelve months ago may be closed to new builders risk today.
• Construction class - ISO class, not just "wood frame vs steel" - materially drives rates. Protected combustible rates lower than unprotected non-combustible in the right class.
• Term, deductible, and endorsement stack - add soft costs, delay in opening, extended testing, and a higher wind deductible, and the quoted premium looks nothing like the base rate.

With that caveat spelled out, here is what the market generally looks like for standard projects in the current rate environment. These are directional ranges, not a quote:

Ranges above are directional for 2026 market pricing on standard risks and are not a quote. Your actual premium depends on ISO Protection Class, specific wildfire and catastrophe exposure, construction class, project term, deductible structure, carrier appetite in your geography, and loss history. Grit's team will confirm pricing for your specific project.

What Drives Your Premium Up or Down

• Total project value. Builders risk is rated as a percentage of the total insured value, so the base premium scales with the project size.
• Construction class. Steel and concrete rate lower than light frame and heavy timber because fire exposure is the number one driver of builders risk losses. A $5M steel commercial build can be priced at a fraction of the rate of a $5M wood frame multifamily.
• Location. Coastal wind exposure, wildfire zones, freeze zones, and urban theft-prone sites push rates up. Rural, inland projects in low-cat states see the lowest rates.
• Project term. Longer projects accumulate more risk exposure. A 24-month build costs more than two consecutive 12-month projects of the same value because the carrier is on the hook longer.
• Deductible. Taking a higher deductible lowers the premium. On large commercial projects, a $25,000 or $50,000 all-other-perils deductible can meaningfully reduce the cost without exposing the owner to a company-breaking loss.
• Separate wind, hail, and named-storm deductibles. In Florida, the Gulf Coast, the Carolinas, and the hail belt, these are usually quoted as a percentage of TIV, not a flat amount. They dramatically affect the net premium and the net out-of-pocket after a storm. Read the deductible page of the quote carefully.
• Added coverages. Soft costs, delay in opening, extended testing/commissioning, and higher transit sub-limits all add to the base premium but are usually worth it on projects where their absence creates a six- or seven-figure gap.
• Loss history and submission quality. A clean three-year loss run plus a well-organized submission (project plans, GC resume, subcontractor list) typically earns better pricing than a bare application. Underwriters price risk partly on confidence, and a confident file lands better than an uncertain one.

Policies can usually be extended if the project runs past the original completion date. Extensions carry additional premium at a prorated rate, so factor realistic delays into your project budget rather than assume the schedule.

Builders Risk vs General Liability vs Inland Marine vs Installation Floater

Four coverages touch construction work, they overlap in places, and contractors routinely find out at claim time which one actually applies. Here is the plain-English version of what each covers.

The Overlap Trap

The common mistake is assuming one of these covers the others. It does not.

• If a fire destroys the half-built structure, that is builders risk, not GL and not inland marine.
• If a subcontractor is injured on your job site, that is workers compensation (their employer's) and potentially your GL, not builders risk.
• If your excavator is stolen from the job site, that is inland marine, not builders risk (which covers materials being installed into the project, not your equipment).
• If a sub damages the project owner's existing building during a tenant improvement, that is the sub's GL, not the builders risk (which usually covers only the new work).
• If a HVAC sub's $200,000 pre-fabricated air handler sits at their shop waiting for installation, that is the sub's installation floater, not the project builders risk (which only picks up coverage once the materials arrive at the job site).

A properly structured construction insurance program layers all four so there is no gap and no overlap: builders risk for the project asset, GL for third-party liability, inland marine for your equipment, and installation floaters for sub-trades where the sub's materials sit off-site before install.

State-Specific Considerations

Builders risk is largely a national market, but a handful of state and regional exposures change the cost, the deductible, or the way you have to buy the policy. Grit places builders risk nationwide and here are the regional patterns that come up most often. State regulations and carrier practices change; confirm specifics with the Grit team before relying on any of the general patterns below for a specific project.

Florida, Gulf Coast, and Named-Storm States

Named-storm (hurricane and tropical storm) deductibles are usually quoted as a percentage of TIV, commonly in the low single digits of project value. Some carriers restrict new builders risk binding in Florida and other coastal markets during hurricane season (June through November) unless the project is already in progress. Build the policy BEFORE storm season starts if the project will span it.

California and Pacific Northwest

Earthquake coverage is excluded from most standard builders risk forms and must be added as a separate endorsement or standalone policy. Earthquake deductibles are also percentage-based, usually in the 5% to 25% range depending on soil type and project location. On any multi-million-dollar project in California, earthquake coverage is a conversation to have before groundbreaking, not after.

Texas, Oklahoma, and the Hail Belt

Wind and hail deductibles may be separate from the all-other-perils deductible and expressed as a percentage. Metal roofing and glass-heavy facades draw additional underwriter scrutiny. A clean submission that addresses hail exposure directly (fastening schedule, drainage, impact-rated glazing) earns better pricing than a submission that ignores it.

Cold-Climate States (Mountain West, Upper Midwest, Northeast)

Frozen pipe and freeze damage are a leading cold-weather claim category. Most policies require specific loss-prevention conditions during the winter months - maintaining heat in the structure once systems are installed, draining lines on unoccupied projects, keeping a watch rotation. Non-compliance can void coverage for freeze losses. If the project will overwinter, build the winterization plan into the policy conversation.

Wildfire-Exposed Western States

Rural and wildland-urban-interface sites in California, Oregon, Washington, Colorado, and parts of the Mountain West face shrinking carrier appetite and higher wildfire deductibles. On any build in a brush-exposed area, defensible space, construction materials (metal roofing, cement board siding), and water supply all enter the underwriting conversation.

States With Statutory Policy-Form Requirements

A small number of states have specific minimum policy form requirements for construction projects receiving state or municipal funding. These are usually addressed by using an ISO-standard builders risk form or a carrier form filed in the state. Grit confirms the correct form before binding on any public or municipally-funded project.

How Grit Places Builders Risk - National Brokerage, Licensed in 34 States

Builders risk is not a standalone purchase. It is one piece of the project insurance program that also includes general liability, workers compensation, inland marine, and on bonded projects, your surety program. Grit is a national brokerage licensed in 34 states and growing, placing builders risk alongside the full construction insurance and surety program for contractors and developers across the country.

When we place builders risk for a contractor or developer, we look at the whole picture:

• Contract requirements. We review the construction contract (AIA, ConsensusDocs, design-build, EPC, or privately negotiated) to confirm who carries builders risk, what limits are required, and which parties must be named as insureds.
• Lender requirements. If a construction lender is involved, their requirements dictate minimum coverage, loss payee language, and sometimes specific policy forms. We coordinate directly with the lender before binding.
• Surety coordination. For general contractors with bonded projects, your surety underwriter wants to see builders risk in place as part of the overall project risk program. We make sure the builders risk, GL, and bond program all work together - one of the practical reasons Grit's bond and P&C teams are under one roof.
• Multiple carrier access. We place builders risk with multiple carriers to find competitive pricing. Different carriers have different appetites - some are better on coastal risk, some on large commercial steel, some on wood frame multifamily, some on renovation work. We match the carrier to the project.
• Master programs for repeat builders. For contractors who build year-round, a master builders risk program can cover multiple projects under one policy instead of buying separate policies for each job. This is often more cost-effective and eliminates coverage gaps between projects.

Frequently Asked Questions

Who pays for builders risk insurance - the owner or the contractor?

It depends on the construction contract. On most commercial projects the property owner purchases builders risk (OCIP structure) and names the general contractor and subcontractors as additional insureds. On design-build and some private projects the GC is required to provide it (CCIP structure). On smaller projects and most renovations, the party identified in the contract simply buys a project-specific policy. If the contract is silent on builders risk, the party with the most financial exposure - usually the owner - should carry it, and the parties should put it in writing before groundbreaking.

Does builders risk cover subcontractor work?

Typically yes. If a subcontractor's completed work is damaged by a covered peril like fire, wind, or theft, the builders risk policy covers the cost to repair or replace that work. Builders risk does not cover faulty workmanship itself - fixing the defective installation is a general liability exposure, not a builders risk claim. The resulting damage to other work caused by the defect may be covered depending on the policy form.

How long does a builders risk policy last?

A builders risk policy is written for the expected construction period, commonly 6, 12, or 18 months. If the project runs longer than expected, the policy can usually be extended for additional premium. Coverage ends when the building receives its certificate of occupancy, the owner takes possession, or the policy term expires - whichever comes first.

Does homeowners insurance cover a renovation?

Standard homeowners insurance may cover minor renovations, but major projects that cost $50,000 or more and significantly alter the structure typically exceed what a homeowners policy will cover. The materials on site, the work in progress, and the increased property value during construction create gaps that homeowners insurance was not designed to fill. A standalone builders risk policy is the safer option for any substantial renovation project.

What is the difference between builders risk and an installation floater?

Builders risk covers the project - the structure, materials on site, and materials in transit to the site. An installation floater covers a specific contractor's materials and work-in-progress from the time they leave the contractor's possession until the installation is accepted. On larger projects, specialty subcontractors (HVAC, electrical, mechanical, millwork) typically carry installation floaters to protect their own materials during pre-fabrication and transit, while the project-level builders risk covers the installed work once it is on site.

Does builders risk cover theft of tools or equipment?

No. Builders risk covers materials and components intended for installation into the project. It does not cover contractor-owned tools, equipment, or portable property that moves between job sites. That exposure belongs on an inland marine (contractor's equipment) policy. The gap bites hardest on specialty trades with expensive packaged materials or large equipment staged off-site before installation.

What happens if the project is delayed past the policy expiration date?

You extend the policy. Builders risk extensions are routine and carriers price them at a prorated rate for the additional time. The important rule: extend BEFORE the original policy expires. If the policy lapses before you extend, coverage ends and any loss after that date is uninsured - even if you extend afterward. Flag any schedule slip to your broker as soon as you see it, not the week before policy expiration.

Who should be named as additional insureds on the policy?

Any party with a financial interest in the project - the general contractor, major subcontractors, the construction lender (as loss payee), and sometimes the architect or construction manager. On OCIP policies the owner names everyone; on CCIP the GC names the owner and lender. The construction contract usually specifies required named insureds and loss payees, and the broker places the policy to match.

Does builders risk cover soft costs like loan interest and permits during a delay?

Only if soft cost coverage is specifically added by endorsement. Standard builders risk policies do not include soft costs. For projects where a covered loss would create significant delay costs (architect fees, loan interest, permit renewals, lost rent during delay), soft cost coverage is a must-have endorsement, and the sub-limit should match the real exposure, not a token amount. Delay in Opening (DIO) coverage goes further, covering lost rental income or revenue from the originally scheduled completion date through actual completion.

Can one builders risk policy cover multiple projects?

Yes, for contractors who build year-round. A master builders risk program covers all qualifying projects under one annual policy with a reporting form, instead of binding a separate policy for each job. Master programs are more cost-effective at volume, eliminate gaps between projects, and reduce the administrative burden of individual placements. Grit sets up master programs for general contractors and developers with consistent project pipelines.

Get Your Project Covered

Whether you are a general contractor, a developer, a specialty subcontractor, or a homeowner building from the ground up, Grit places builders risk alongside your full insurance and bonding program. We coordinate the builders risk policy with your GL, workers comp, inland marine, and surety so the whole project program works together from day one. National brokerage, construction-focused, licensed in 34 states.

Call us directly: (801) 505-5500

Or request a quote online.

Related: What Is Builders Risk Insurance and When Is It Required? | Contractor Insurance | General Contractor Insurance