Builder's risk insurance — also called course of construction insurance — provides property coverage for buildings and structures during construction, renovation, or installation. Coverage includes the building under construction, materials, fixtures, equipment to be installed, and temporary structures. Covered perils typically include fire, wind, theft, vandalism, and water damage. Coverage begins when materials arrive at the jobsite and ends when the project is complete or occupied.
Building owners, general contractors, and developers undertaking new construction, renovation, or installation projects. Builder's risk is typically required by construction lenders and is addressed in construction contract terms (specifying who is responsible for purchasing coverage). Both ground-up construction and major renovation projects need builder's risk coverage. The policy protects the investment in materials and labor during the most vulnerable phase.
Builder's risk policies can be written on a project-specific basis for individual projects or as a master/reporting policy covering multiple projects. Coverage is typically written on a completed value basis (covering the full project value from day one) or a reporting basis (with periodic value reporting as construction progresses). Coverage includes soft costs (architect fees, loan interest, permit fees) that continue during delays caused by covered losses.
Builder's risk limits equal the total completed value of the project, including materials, labor, and soft costs. Deductibles range from $5K to $100K depending on project size. Wind/hail deductibles in coastal areas may be 2-5% of the project value. Named storm deductibles may apply in hurricane-prone regions. Premium is a one-time charge (not annual) based on project value, construction type, and location, typically 0.5-3% of project value.
A 12-story residential construction project sustained $3.8M in damage when a severe windstorm destroyed the partially completed upper floors and damaged materials and equipment on site. The builder's risk policy covered building reconstruction costs, damaged materials, and $420K in soft costs (extended interest payments and architect redesign fees) — keeping the project financially viable despite a 4-month delay.