Key Takeaways
- Builders risk is property insurance for a structure under construction: it covers the building, materials stored on site and, in most cases, materials in transit.
- Premiums typically run 0.5% to 1% of the completed project value, with renovation work at the top of the range and coastal Texas and Florida projects costing more.
- Coverage must be in force before materials arrive or work begins, because carriers will not backdate a policy, and soft costs need a separate endorsement.
New construction and remodeling projects carry some very specific risks that require insurance. Your general liability insurance only protects you from third-party lawsuits. This leaves the structure, materials, and labor uninsured against fire, theft, and severe weather. An affordable Builders Risk Insurance policy bridges this critical gap, ensuring that a single incident doesn’t put you out of business. You need the protection Builders Risk Insurance offers.
What does a builders risk insurance policy cover?
Builders risk is property insurance for a structure under construction. It covers the building itself, materials stored on site, and in most cases materials in transit or temporarily stored off site. When a covered event causes physical damage, the policy pays for repairs, replacement materials, and debris removal.
| Covered perils (standard policy) | Typically excluded |
|---|---|
| Fire and lightning | Flood (requires separate endorsement) |
| Windstorm and hail | Earthquake (requires separate endorsement) |
| Theft | Employee theft or dishonesty |
| Vandalism | Faulty workmanship or defective design |
| Vehicle impact | Normal wear and settling |
| Explosion | Mechanical breakdown |
| Falling objects | War and government action |
There are two different types of Builders Risk Insurance Policies.
- Standard policies cover named perils only. You must prove that a specific peril on the list caused the damage.
- Broad-form or open-peril policies cover any loss not specifically excluded. The insurance company must prove that the cause of damage is explicitly excluded in the policy.
The difference matters when an unusual event causes damage. If the named-peril policy does not name the peril, you do not have coverage. Buying an open-peril policy does not mean you have coverage for every type of loss. It means you have to look at the Exclusions Section to see if that type of loss is excluded. It’s best practice to review this before binding any policy. This prevents any nasty surprises in the event of a claim.
How much does builders risk insurance cost?
Builders risk is priced as a percentage of the total completed project value. The premium amount is between 0.5% and 1% of the value. New ground construction is at the lower end of the range. Renovation and Remodeling work are at the top of the range. This type of work is more expensive because the existing structure introduces more variables. Everyone who has ever done renovations realizes that the minute you start taking things apart unforeseen issues always arise.
Other brokers may charge 1% to 4% for similair policies offered by us.
Builders risk cost by project value: new construction vs. renovation
| Project value | New construction (approx. 0.50%) | Renovation/rehab (approx. 1.00%) |
|---|---|---|
| Under $150,000 | $500 to $750 | $1,000 to $1,500 |
| $150,000 to $500,000 | $750 to $2,500 | $1,500 to $5,000 |
| $500,000 to $1,000,000 | $2,500 to $5,000 | $5,000 to $10,000 |
| $1,000,000 to $5,000,000 | $5,000 to $25,000 | $10,000 to $50,000 |
These figures reflect ballpark historical quoted rates for standard construction in non-coastal locations with clean claims history. Coastal exposure, flood zones, and wood-frame construction rates are higher than the figures provided.
What moves builders risk premiums up or down.
| Factor | Effect on premium |
|---|---|
| Wood-frame construction | Higher than steel or masonry due to fire risk |
| Coastal location | Significantly higher; may require surplus lines carrier |
| FEMA flood zone designation | Higher flood endorsement is usually required |
| High-crime location | Higher theft exposure raises the base rate |
| Extended project timeline | A longer exposure period means a higher total cost |
| Soft cost endorsement | Adds to base premium |
| Earthquake endorsement | Adds to the base premium based on seismic zone |
| Prior losses | Clean history gets lower rates; claims raise them |
What builders risk soft costs cover and when they matter.
Soft costs are the non-physical, indirect expenses required to plan, finance, manage, and complete a building project. These typically constitute 30% of the total project budget. This overhead continues even if your construction schedule stops. Without a specific endorsement, a standard builders risk policy will only pay to repair the physical damage, leaving you to pay these ongoing expenses out of pocket.
An example of the real cost of delay when a project stalls is as follows: Consider the financial impact of a 2-month delay on a $2,000,000 project with a 7% construction loan:
- $23,333 in additional interest alone—before adding any other expenses.
- The cost of permit re-fees and municipal penalties.
- Unexpected architectural and engineering revisions.
- Thousands in lost rental or sales income if the finished building is meant to generate immediate revenue.
In many cases, total soft-cost exposure from a delay can exceed the cost of the physical repairs.
Soft cost coverage is an endorsement, not a standard inclusion in a base builders risk policy. If your project relies on a construction loan or a hard commercial timeline, you must have this coverage. It is the only thing that prevents a temporary delay from turning into a permanent financial collapse.
Commercial builders risk at larger project values.
If you are financing your project, builders risk coverage is not optional. All commercial construction lenders require Builders Risk insurance before issuing the first draw on your financing.
The main types of projects requiring this low-cost Builders Risk Insurance include the following:
- Office Buildings: High-rise offices and other office space.
- Retail Spaces: Shopping centers, standalone storefronts, and strip malls.
- Warehouses: Large-scale distribution centers and industrial storage facilities.
- Multifamily Developments: Apartments, condominiums, and townhome communities.
- Mixed-Use Projects: Urban developments that combine retail and residential spaces.
Consider the lender’s perspective: if they advance funds on a $5 million project, they need absolute certainty that an incident will not leave them with an uninsured, half-finished structure. A Builders risk policy ensures your funding keeps flowing without interruption.
Commercial builders risk cost at standard rates
| Project value | Approximate annual premium (0.50% to 1.00%) |
|---|---|
| $500,000 to $1,000,000 | $2,500 to $10,000 |
| $1,000,000 to $2,500,000 | $5,000 to $25,000 |
| $2,500,000 to $5,000,000 | $12,500 to $50,000 |
| Above $5,000,000 | Quoted individually by carrier |
Based on the large dollar value and potential for catastrophic losses, Commercial Builders Risk policies must be carefully set up and reviewed.
The hard costs, soft costs, and delay coverage require analysis and review before the policy is bound.
Setting Up a Builders Risk Policy
Who buys builders risk: owner, contractor, or both.
For residential new construction, usually the owner. For commercial projects, the general contractor often provides the coverage. There is no hard-and-fast rule on who should purchase the policy. Discuss all of this before any work begins, and the contract should specify who is responsible for procuring the Builders Risk Policy.
A problem arising from poor planning is that both parties assume the other has coverage, and neither does. If a claim arises on a project with no policy in place, the resulting financial losses can be significant. Furthermore, disputes over who should have purchased the policy add expense and delays.
Both the owner and the general contractor should be named insureds on the policy, regardless of who pays.
When builders risk coverage needs to start and when it ends.
| Trigger | What it means |
|---|---|
| Policy must be in force before | Materials arrive on site |
| Renovation projects generally need a standalone policy when | Changes exceed approximately 10% of the existing structure value |
| Coverage ends when | The owner formally accepts the completed project |
| Coverage also ends when | The project is abandoned |
| Coverage ends automatically | 60 to 90 days after occupancy begins, depending on policy form |
| Projects running over schedule need | A policy extension before the end date, not after |
All insurance carriers will not backdate a policy. A loss that occurs before coverage is bound is uninsured. Make sure the policy is in force before any materials are delivered or work begins. It is also important to note that it can be extremely difficult to obtain coverage after a project has begun, even if there is no loss.
Optional endorsements worth considering
| Endorsement | What it covers | Who needs it |
|---|---|---|
| Flood | Rising water damage | Any project in or near a FEMA flood zone |
| Earthquake | Seismic damage | Projects in active seismic zones |
| Soft costs and delay in startup | Loan interest, permit re-fees, lost income during delay | Any project with a construction loan |
| Ordinance and law compliance | Added the cost of rebuilding to the current code after a covered loss | Renovations on older structures |
| Contractor’s equipment | Tools and equipment on site | Contractors with significant equipment investment |
| Pollution cleanup | Hazardous materials were disturbed during construction | Excavation, demolition, and renovation of pre-1980 structures |
| Transit coverage extension | Materials were damaged in transport to the site | Large projects with materials shipped from multiple locations |
Builders risk in Texas.
Obtaining Coastal construction Builders Risk Insurance in Texas is among the most challenging situations in the country. The Gulf Coast, from Houston down to Corpus Christi, carries wind and hail exposure that sends most projects into the surplus lines market. Premiums are higher, and policy terms are less predictable than standard market coverage. Obtaining wind coverage is the first task on any coastal Texas project. It should happen before permits are pulled. Once the job starts, it is too late.
Inland Texas Builders Risk is straightforward. Standard carriers readily accept projects in Dallas, Austin, and San Antonio at competitive rates. The difference between coastal and inland pricing in Texas is dramatic.
Builders risk in Florida.
Without a doubt Florida is the most expensive builders risk market in the country. From hurricane exposure and widespread flood risk, coupled with high litigation rates most standard carriers left the state entirely, particularly in South Florida.
Policies in Miami-Dade and Broward Countie always require separate wind and flood endorsements. These endorsements are not cheap. FEMA flood zone designation is more common than in any other state. Flood coverage is never included in a standard Florida policy. Contractors unfamiliar with this will find out the hard way after a flood loss.
Central Florida and the Panhandle are more manageable. Standard market coverage is often available. Rates are generally lower than in coastal areas. Having FarmerBrown.com, getting you multiple carrier quotes is your best option. In most cases, the difference between the highest and lowest quote on a Florida project can be substantial.
Getting builders risk priced before the project starts.
FarmerBrown.com works with A-rated carriers including Nationwide, Zurich, The Hartford, Travelers, and Liberty Mutual. Quotes are available online for contractors, developers, and homeowners across all 50 states. Same-day binding is available in most cases.
Frequently asked questions about builders risk insurance.
Lenders typically require it as a condition of the construction loan.
Project owners often require it in the general contractor’s contract.
Homeowners have no legal requirement to have it. Without it, they would pay the full cost of any loss out of pocket. Note that your homeowner’s insurance policy will not cover these losses.
No. Standard builders risk covers materials that become part of the structure. Contractor tools and equipment need either a separate endorsement or a standalone inland marine policy.
The policy ends on its expiration date regardless of project status. A loss between expiration and a new extension is uninsured. Extensions need to be arranged before the end date, not after.
Sometimes partially. But homeowner’s policies are not built for construction exposure, and the limits are usually inadequate for structural work. Any renovation that exceeds roughly 10% of the home’s value would require a standalone builders risk policy.
Same-day in most states. FarmerBrown.com issues certificates of insurance within four hours of binding.
Yes, as long as the policy is structured correctly and both the owner and general contractor are named insureds. Subcontractor liability claims are covered under the Subcontractor’s own GL policies.
