What is builders risk insurance?

Construction projects fail for many reasons. Bad weather. Theft. A fire that guts two weeks of framing work overnight. Builders risk insurance exists because none of those events are covered by general liability, and without it, the contractor or property owner absorbs the full cost of recovery. Farmer Brown Insurance has been placing builders risk coverage for contractors, developers, and homeowners across all 50 states since 1996.

What does builders risk insurance cover?

Builders risk insurance is property insurance for a structure that does not exist yet. It covers the building under construction, materials stored on site, and in most cases materials in transit or held temporarily off site. When a covered event causes physical damage, the policy pays for repairs, replacement materials, and debris removal.

A standard policy covers fire, lightning, windstorm, hail, theft, vandalism, vehicle impact, and explosion. Broad-form or open-peril policies cover any loss not specifically excluded. Named-peril policies only respond to events listed in the document, which can leave real gaps if a contractor does not read the exclusions carefully before binding.

What does builders risk insurance not cover?

Floods, earthquakes, and named storms are excluded from standard policies unless a specific endorsement is added. So are employee theft, defective design, faulty workmanship, and normal wear. Contractors working near the coast or in flood zones need to address those perils explicitly before the project starts, not after a loss.

What are builders risk soft costs?

Soft costs are secondary financial costs incurred when a covered loss delays a project. Not materials. Not labor. The expenses that keep accruing while the job sits still.

Extended loan interest is the most common one. A two-month delay on a $2 million build with a 7% construction loan rate costs roughly $23,000 in interest before accounting for anything else. Add permit re-fees, architectural revisions, and lost rental income if the finished building was going to be leased, and the number climbs fast. Soft cost coverage is an endorsement, not a standard inclusion. On any project with a construction loan, skipping it is a real exposure.

How much does builders risk insurance cost?

Most policies run 1% to 5% of the total completed project value. A $100,000 residential build typically costs $1,000 to $5,000 to insure. A $1 million project runs $10,000 to $50,000. Smaller renovation projects often cost $100 to $300 per month.

Wood-frame construction costs more than steel or masonry because of fire risk. High-crime areas and flood zones push premiums up. Longer timelines mean more exposure. Soft cost endorsements, earthquake coverage, and ordinance and law compliance all add to the base premium.

What is commercial builders risk insurance?

Commercial builders risk covers office buildings, retail spaces, warehouses, and multifamily developments. The structure of the coverage is similar to residential, but the stakes are different.

Most commercial construction loans require builders risk as a condition of the draw schedule. Lenders want confirmation that a covered loss will not leave them holding a half-finished building. On a $5 million commercial project, premiums typically range from $50,000 to $250,000 depending on construction type, location, and timeline. Hard costs, soft costs, and delay coverage all deserve attention on any commercial project above $1 million.

Do homeowners need builders risk insurance?

If a homeowner is building a new home or doing a major renovation, they need it. The contractor’s general liability policy covers third-party injuries and property damage. It does not cover damage to the structure being built.

Some contractors include builders risk in their contract pricing. Others do not. Before signing, homeowners should confirm in writing who is responsible for purchasing the policy. That conversation is a lot easier to have before a storm damages open framing than after.

Existing homeowners’ insurance policies sometimes provide partial coverage for renovation work, but the limits are usually inadequate for structural changes or significant square footage additions.

Who pays for builders risk insurance?

On residential new construction, usually the owner. On commercial projects, often the general contractor. Neither answer is universal and the contract should spell it out before work begins.

The real problem is not who pays. It is when both parties assume the other has it handled and neither does. Both the owner and the contractor should be named insureds on the policy, regardless of who writes the check.

Is builders risk insurance required in Texas?

Texas is a large and active construction market with significant variation in risk depending on the project’s location. Inland projects in Dallas, Austin, and San Antonio are generally straightforward to place and competitively priced. Coastal projects are a different situation entirely.

The Gulf Coast, including Houston, Galveston, and Corpus Christi, carries serious wind and hail exposure. Standard carriers often restrict or exclude wind coverage in those areas, pushing contractors and developers into the surplus lines market where premiums are higher and terms vary more. Anyone building near the coast in Texas should get wind coverage sorted before anything else.

Is builders risk insurance required in Florida?

Florida is the most difficult builders risk market in the country. Hurricane exposure, widespread flood risk, and high litigation rates have pushed many standard carriers out of the state entirely, particularly in South Florida.

Policies in Miami-Dade and Broward Counties almost always require separate wind and flood endorsements, which are expensive. FEMA flood zone designation matters a lot here. Contractors who assume flood coverage is included in a standard policy and find out otherwise after a loss are in a difficult position.

Central Florida and the Panhandle are more manageable. Standard market coverage is accessible and rates are more predictable. Across the state, getting multiple carrier quotes before binding is worth doing because the spread between the highest and lowest quote on a Florida project can be substantial.

When should builders risk coverage start and when does it end?

Before materials arrive on site. Most insurers will not backdate a policy, and a loss that occurs before coverage is bound is an uninsured loss regardless of when the policy is eventually purchased.

For renovations, the general threshold is whether changes exceed roughly 10% of the existing structure’s value. Projects at that level or higher usually require a standalone policy rather than relying on existing property coverage.

Coverage ends when the owner accepts the completed project, when the project is abandoned, when the policy expires, or 60 to 90 days after occupancy begins depending on the policy form. Projects that run over schedule need extensions before the end date passes, not after.

What optional coverages are worth adding?

Flood and earthquake endorsements for projects in exposed locations. Soft costs and delay in startup coverage for any project with a construction loan. Pollution cleanup on sites that may encounter hazardous materials. Ordinance and law compliance coverage, which pays the added cost of rebuilding to current code after a covered loss rather than the old standard the original structure was built to.

How do I get builders risk insurance?

Farmer Brown works with A-rated carriers including Nationwide, Zurich, The Hartford, Travelers, and Liberty Mutual. Same-day coverage is available in most cases. Contractors, developers, and homeowners can visit the builders risk insurance page to request a quote online or call to talk through options before the project starts.