Builders Risk Insurance
Property coverage protecting buildings under construction against physical damage from fire, wind, theft, and other covered perils during the construction period.
What It Is
Builders Risk Insurance (also called Course of Construction insurance) is a specialized property policy that covers buildings, structures, and materials during the construction process. Coverage typically applies to the structure being built, materials and supplies on-site or in transit, temporary structures (scaffolding, fencing, construction trailers), and soft costs such as architectural fees and loan interest if a covered loss delays the project.
Policies can be written on a completed-value basis (insured for the full projected value from day one) or a reporting-form basis (value reported as construction progresses). The coverage period typically runs from project commencement to the earlier of: substantial completion, occupancy by the owner, or the policy expiration date.
Builders risk policies are either project-specific (covering a single construction project) or can be master/blanket programs covering all of a contractor's projects.
Why It Matters for Brokers
Every construction project needs builders risk coverage, and the question of who purchases it — the owner, general contractor, or developer — is a critical contract negotiation point. Brokers must understand how the builders risk policy interacts with the contractor's commercial property policy and the permanent property policy that will replace it after construction. Coverage gaps during the transition from builders risk to permanent coverage are a significant E&O exposure.
Real-World Example
A developer is constructing a $28M mixed-use building. Three months before completion, a fire in the mechanical room causes $4.2M in damage to installed HVAC systems, electrical work, and interior finishes. The builders risk policy covers the repair costs plus $380K in soft costs including additional architectural fees, extended loan interest, and project management costs associated with the 10-week delay.
Common Mistakes
- 1Not verifying whether the builders risk policy covers existing structures during renovation projects — standard builders risk may only cover new construction unless specifically endorsed.
- 2Failing to coordinate the builders risk expiration with the permanent property policy inception, creating an uninsured gap if the project completes early or late.
- 3Overlooking the need for flood and earthquake coverage on the builders risk policy in high-risk zones, which are typically excluded and require separate endorsements.
How brokerageaudit.com Handles This
Policy Checker extracts builders risk policy terms including project address, coverage limits, soft cost extensions, and coverage period. The system monitors construction timelines and alerts brokers when builder's risk expiration approaches so the transition to permanent property coverage can be coordinated.