What Is Builder's Risk Insurance?

Building a home is exciting, but it also comes with risk.

Before the walls go up, you’ve already invested time, money, and vision into your future home. So why wouldn’t you want to protect your investment?

With builder’s risk insurance, you can protect your construction site, your building materials, and the financial interest you have in the project itself.

If this is your first time hearing the term, you’re not alone. 

Many property owners don’t learn about builder’s risk coverage until they’re already deep into planning. 

But this short-term construction insurance plays a big role in keeping your construction project on track.

So, what is builder’s risk insurance? 

This guide explains it all, including:

• The definition of builder’s risk insurance
• What a builder’s risk policy covers (and what it doesn’t)
• Who needs builder’s risk insurance
• How much builder’s risk insurance costs
• What to look for when you purchase coverage

Let’s break it all down.

The Definition Of Builder's Risk Insurance 

Builder’s risk insurance is a special type of construction insurance designed to protect a home while it’s being built.

But it’s not the same as homeowner’s insurance. 

A Builder's Risk Insurance policy covers your construction site, not your finished home.

Think of it as temporary property coverage that helps shield your investment from the most common risks during a build.

A standard builder’s risk policy typically lasts for the duration of the build (usually 3, 6, or 12 months). It can sometimes be extended if the project runs long.

Policies are generally written on a standard property insurance form or an inland marine form, depending on the insurance provider.

Here’s what makes it different from other insurance policies:

• It only applies while the home is under construction or undergoing major renovation.
• It covers building materials, equipment, and structures tied to the project (either on the site or in transit).

What Does Builder’s Risk Insurance Cover?

A builder’s risk insurance policy delivers broad protection for physical materials used in your construction project, along with the money you’ve already put into it.

Below is a breakdown of what a builder’s risk insurance policy usually covers.

Property and Materials

• The structure itself: Builder’s risk insurance can cover new construction homes or major renovations.
• Building materials: It covers anything stored on the construction site, in transit, or at a temporary location (like a warehouse or staging area).
• Temporary structures: These include scaffolding, fencing, forms, and temporary storage buildings.
• Fixtures and foundations: These often qualify as part of the covered property.
• Landscaping elements: This includes sod, trees, and shrubs (but coverage depends on the policy).

Covered Perils & Risks

A good builder’s risk policy helps protect against:

• Fire
• Theft (excluding employee theft)
• Vandalism
• Wind, lightning, or hail (depending on location and insurance provider)
• Explosions
• Some forms of water damage (policy-specific)

Some policies also let you add coverage for soft costs like extended loan interest, additional permit fees, or architectural expenses. 

These tend to come up when a covered delay pushes your project off schedule.

What’s Not Covered By A Builder’s Risk Insurance Policy?

Builder’s risk insurance coverage helps protect your home while it’s under construction. But like any insurance, it has limits.

Most builder’s risk insurance policies include a list of common exclusions that may surprise you. 

These are the things your policy won’t cover unless you specifically add them as endorsements.

Here’s what’s typically not covered:

• Employee theft: Your policy may cover stolen construction materials, but not if a worker on your job site takes them.
• War, terrorism, and civil unrest: These are high-risk events. They are almost always excluded.
• Earthquakes and floods: These can be added, but they’re not part of most standard risk insurance coverage.
• Contract penalties or delays: If your project runs late or you face penalties, those are financial risks, not physical ones.
• Corrosion, mechanical breakdowns, or rust: Long-term deterioration is outside the scope of a temporary construction insurance policy.
• Faulty design, materials, or workmanship: If something goes wrong because of poor construction, the builder’s insurance likely won’t help.

Remember, builder’s risk policies don’t cover damage that results from mistakes made during the design or construction process, even if the materials themselves are covered. 

So if a wall collapses because it wasn’t built properly, that repair isn’t included.

Builder’s risk insurance also doesn’t cover injuries or third-party property damage. This is covered by general liability insurance.

Builder’s risk insurance policies focus on protecting the property and construction materials. But they don’t cover legal issues, labor disputes, or faulty craftsmanship. 

Make sure your insurance agent walks you through any gaps so you’re not caught off guard.

Who Needs Builder’s Risk Insurance Coverage?

Even if you're not the one swinging the hammer, there's a good chance you need builder’s risk insurance if you're building a home from the ground up,

This type of construction insurance protects anyone with a financial stake in the project. 

And whether you're a first-time home buyer, working with a general contractor, or financing your build through a bank, there's real money on the line long before move-in day.

Here are the most common policyholders:

• Property owners and future homeowners: If you’re investing your own money or taking out personal loans to fund the build, protecting that investment with a builder’s risk policy is just smart.
• General contractors and trade contractors: Contractors often purchase builder’s insurance to protect their work, meet contract requirements, or satisfy lender demands.
• Developers and construction businesses: When multiple parties are involved risk insurance may be required to protect everyone’s interest.
• Lenders and investment companies: Most financial institutions require proof of builder’s risk insurance coverage before they’ll release funds for a building project.

Anyone who stands to lose money if the construction project goes sideways should obtain coverage. 

If you're unsure whether you qualify, talk to your builder, lender, or insurance broker. They can help determine whether you need to purchase builder’s risk insurance for your project.

When Does Builder’s Risk Insurance Coverage Start And End?

Most builder’s risk policies start when construction begins. 

But coverage doesn’t last forever, and it doesn’t cover the planning phase either.

Once ground is broken or materials arrive at the job site, your coverage kicks in. 

But when does it end?

That depends on your specific insurance policy, but here are the most common triggers.

• Project completion: Once the home is fully built and passes final inspection, your risk insurance policy may automatically expire.
• Occupancy: If someone moves into the home, whether it's you or a tenant, the coverage typically ends.
• Owner acceptance: When you sign off and officially take ownership of the completed build, coverage may stop.
• Abandonment: If you abandon the project midway through, your coverage expires.

Every builder’s risk insurance provider defines “completion” a little differently. 

Some base it on physical completion, others on permit approval, and some on a set percentage of work finished. 

That’s why it’s critical to review your coverage options and know your policy’s terms upfront.

Once the policy ends, you’ll usually need to transition to homeowners insurance or a different type of property coverage, depending on how the home will be used.

Speak with your insurance provider to confirm exactly when coverage starts and ends. Especially if your project involves temporary structures or stored building materials.

Builder’s Risk Insurance Cost: What Affects Pricing?

Wondering what builder’s risk insurance costs? Like most things in the construction industry, the answer is: it depends.

In general, you can expect to pay about 1–5% of your total construction budget. 

That means if your new home costs $500,000 to build, your builder’s risk insurance policy might run anywhere from $5,000 to $25,000.

Your final price is based on the key factors below.

• Type of project: New construction typically costs more to insure than a renovation or remodel, since the financial stake and risk exposure are higher.
• Total project cost: More expensive builds come with higher coverage limits, which increases the premium.
• Location and risk level: Building in a high-crime area or a region prone to wildfires, hurricanes, or flooding? That’ll impact your rate.
• Construction type and building materials: Fire-resistant or non-combustible materials may reduce risk—and your premium. Using high-end finishes or custom design elements could raise it.
• Policy duration: Longer builds mean more time on the job site, which can lead to a higher premium.
• Endorsements and coverage options: If you add protections for earthquakes, floods, or soft costs, those will increase the total cost. So will coverage extensions like debris removal or temporary structures.

To get the best value, talk to an insurance agent or brokerage service that understands risk insurance coverage for residential property. 

They can help you compare insurance policies and find the right balance between protection and price.

Types Of Builder’s Risk Policies

Not every builder’s risk insurance policy looks the same. The right one for you depends on what you're building, how you're building it, and how the insurance provider structures their coverage options.

Here are the main types to know:

• Residential Coverage: Covers single-family homes, custom builds, or major renovations on private property.
• Commercial Coverage: Applies to office buildings, retail spaces, apartment complexes, and multifamily housing.

• New construction coverage: Covers everything from the ground up. Foundation, frame, and all building materials on-site or in transit.
• Renovation/remodel coverage: More limited in scope. Policies may only protect specific improvements, not the existing structure.

If you’re planning major structural and functional changes to an older home, you may still need risk insurance coverage. But the terms will be different from a ground-up build.

How To Choose the Right Builder’s Risk Policy For Your Project

When shopping for builder’s risk insurance, price matters. But so does getting the proper coverage for your home build, from start to finish.

Here’s how to find a builder’s risk policy that fits your project:

Get Multiple Quotes

Start by contacting a few reputable insurance brokers or insurance companies that specialize in construction insurance. Rates and coverage options can vary a lot, so it pays to compare.

Review the Fine Print

Once you have quotes in hand, look closely at these details:

• Coverage limits: Make sure they match the full project cost, including building materials, soft costs, and any temporary structures.
• Deductibles: A lower premium often means a higher deductible. Know what you’ll pay out-of-pocket if there’s a claim.
• Exclusions and endorsements: Review what’s not covered. If you need protections for flood, earthquake, or debris removal, those must be added as endorsements.

Choose A Strong Provider

Look into the financial strength and claims history of each insurance provider. The last thing you want is a shaky company backing your property coverage during construction.

Ask for recommendations from your general contractor, lender, or others in the construction industry who regularly deal with builder’s insurance.

Work With A Pro

An insurance agent or brokerage service that understands construction risk can walk you through your options and point out red flags. 

For most home builds, you’ll use what’s called a completed value form. This insures the full project cost from the start. Your agent can confirm this. 

Other options, like reporting forms, are typically used for commercial or multi-project policies.

Speak with your agent to tailor your policy to match your budget, your job site, and your timeline.

Protect Your Investment Before The First Nail Is Hammered

Builder’s risk insurance may not be the first thing that comes to mind when you’re planning your dream home.

But it’s one of the most important.

Whether you’re managing part of the build yourself or working with a general contractor, builder’s risk insurance is often required before construction begins.

And even if it’s not required, it’s often worth it to protect your financial interest in the project.

At Dunn & Stone, we walk every client through the steps of building a new home. That includes what to expect when it comes to construction timelines, budgeting, and coverage requirements.

If you’re thinking about building a new home, get in touch with the Dunn & Stone team. 

We’ll help you understand what you’ll need from start to finish and connect you with trusted pros who can guide you on coverage options.

Frequently Asked Questions

What Is Builder’s Risk Insurance, And How Is It Different From Homeowner’s Insurance?

Builder’s risk insurance protects a home while it’s under construction. It covers the structure, job site, and building materials. Homeowners insurance, by contrast, covers a completed, occupied home.

Do I Need Builder’s Risk Insurance For A Custom Home?

Yes. If you have a financial stake in the build, builder’s risk insurance helps protect it. Lenders often require it, and even cash buyers benefit from coverage.

Can I Purchase Builder’s Risk Insurance As A Homeowner?

Yes. Homeowners can buy builder’s risk insurance directly or be added to a contractor’s policy. Just make sure your name is listed on the policy documents.

How Much Does Builder’s Risk Insurance Cost For A Residential Build?

Builder’s risk insurance typically costs 1–4% of your total construction budget. Pricing depends on location, coverage limits, and project type.

What Does Builder’s Risk Insurance Not Cover?

It doesn’t cover employee theft, faulty workmanship, war, or tools. Builder’s risk insurance also excludes bodily injury or liability claims.

When Does Builder’s Risk Coverage Begin And End?

Coverage begins when construction starts and ends when the home is complete, occupied, or accepted by the owner, whichever comes first.

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