Builders Risk Insurance for Contractors
What Is Builders Risk Insurance?
Builders Risk insurance is a temporary property policy designed to protect a construction project while it is under construction. It covers physical loss or damage to the structure, materials, and supplies caused by covered events such as fire, wind, theft, vandalism, and certain weather-related losses.
Unlike General Liability, which protects against third-party injury or damage, Builders Risk protects the project itself.
This coverage is often required by:
- Owners
- Lenders
- General contractors
- Project contracts and loan agreements
And it is one of the most commonly misunderstood policies in construction insurance.
Builders Risk vs. Installation Floater
One of the most frequent points of confusion we see is the difference between Builders Risk and Installation Floater coverage, which is typically written under an Inland Marine policy.
Builders Risk (Project-Level Coverage)
- Covers the entire structure under construction
- Typically purchased by the owner or general contractor
- Applies to the full completed value of the project
- Covers materials, fixtures, and building components once they become part of the job
- Policy term usually runs from groundbreaking to completion
Installation Floater (Contractor-Level Coverage)
- Covers specific materials and equipment a contractor is responsible for
- Typically purchased by subcontractors
- Often applies while materials are in transit, stored off-site, or awaiting installation
- Limits are based on the contractor’s scope, not the full project value
Key takeaway:
Builders Risk protects the project.
Installation Floaters protect the contractor’s portion of materials and work.
They are not interchangeable and many projects require both.
Who Should Carry Builders Risk?
This depends on the contract structure and this is where mistakes often happen.
Common Builders Risk Structures
Owner-Purchased Builders Risk
- Common on large or lender-financed projects
- Owner insures the full completed value
- Contractors and subs are typically named as insureds or additional insureds
- Reduces coverage gaps between trades
General Contractor–Purchased Builders Risk
- Common on negotiated or design-build projects
- GC controls coverage terms and limits
- Cost is often passed through to the owner
- Requires careful coordination with subs
Subcontractor Responsibility (Less Common, Higher Risk)
- Subs rely on installation floaters
- Builders Risk may be absent or insufficient
- This structure often creates coverage gaps and finger-pointing during claims
Contract language matters more than assumptions.
What Does Builders Risk Typically Cover?
Coverage varies by carrier and form, but Builders Risk often includes:
- The structure under construction
- Building materials on-site
- Materials temporarily stored off-site (within limits)
- Fixtures and equipment intended to become part of the building
- Temporary structures (scaffolding, forms, fencing)
- Debris removal after a covered loss
Optional or project-specific enhancements may include:
- Soft costs
- Delay in completion
- Transit coverage
- Testing coverage
- Theft and vandalism extensions
What Builders Risk Typically Does Not Cover
Builders Risk generally excludes:
- Faulty workmanship or design errors
- Normal wear and tear
- Employee theft
- Flood and earthquake (unless specifically endorsed)
- Mechanical breakdown
- Contractor tools and equipment (covered under Inland Marine)
Builders Risk is
not a performance guarantee.
It responds to sudden, accidental physical loss — not poor construction.
Why Builders Risk Claims Can Become Complicated
Builders Risk claims often involve multiple parties and moving parts, including:
- Multiple contractors and trades
- Contractual insurance responsibilities
- Coordination between owner, general contractor, and subcontractors
- Coverage that varies by policy form and carrier
- Project delays that can increase financial impact
In some situations, claims issues arise when project details are incomplete or responsibilities are not clearly documented, such as:
- Project values that do not reflect the full completed cost
- Named insureds that do not align with contractual requirements
- Materials or locations not clearly addressed in the policy
- Differing interpretations of who was responsible for insuring the project
These are common areas of confusion across the construction industry and highlight why upfront planning matters.
Our Approach to Builders Risk Coverage
Builders Risk is not a one-size-fits-all policy. Our role is to help contractors and owners evaluate project-specific considerations before coverage is placed.
When advising on Builders Risk, our process typically includes:
- Reviewing contract insurance requirements related to property coverage
- Helping clarify owner, GC, and subcontractor insurance responsibilities
- Coordinating Builders Risk with related coverages such as Inland Marine, General Liability, and Umbrella
- Discussing project values and timelines to help inform coverage limits
- Identifying potential overlaps or gaps that may warrant further discussion
This consultative approach is consistent with how we advise contractors across all major coverage lines and is designed to support informed decision-making before a project begins.
Builders Risk Insurance FAQs
Who typically carries Builders Risk insurance?
Builders Risk may be purchased by the project owner or the general contractor, depending on contract requirements and lender expectations. Insurance responsibility should always be confirmed in the construction agreement.
Is Builders Risk required on all construction projects?
Not always, but it is commonly required on larger projects or when financing is involved. Even when not required, Builders Risk may still be appropriate depending on project scope and risk.
Does Builders Risk cover subcontractors?
Subcontractors may be included as insureds or additional insureds depending on how the policy is written.
Subcontractors often still carry Installation Floater coverage for materials under their control.
What is the difference between Builders Risk and Installation Floater coverage?
Builders Risk typically covers the structure and materials for the overall project, while Installation Floater coverage applies to a contractor’s specific materials and work. The two coverages address different exposures and are not interchangeable.
Does Builders Risk cover materials stored off-site?
Some Builders Risk policies may cover off-site materials, subject to limits and policy conditions. Coverage for off-site storage should be reviewed in advance.
Are tools and contractor equipment covered under Builders Risk?
No. Contractor tools and equipment are generally covered under Inland Marine policies, not Builders Risk.
Does Builders Risk include flood or earthquake coverage?
Flood and earthquake are commonly excluded unless specifically endorsed. Availability and terms vary by carrier.
When does Builders Risk coverage begin and end?
Coverage typically begins at the start of construction and ends at project completion or occupancy, depending on the policy. Timing should be reviewed carefully to avoid gaps.
Can Builders Risk be extended if a project is delayed?
In some cases, policies can be extended, subject to underwriting approval. Extensions should be addressed before coverage expiration.
Is Builders Risk the same as General Liability insurance?
No. Builders Risk covers damage to the project itself, while General Liability addresses third-party injury or property damage.
How is the Builders Risk limit determined?
Limits are typically based on the estimated completed value of the project, including labor and materials. Accurately estimating this value is important when evaluating coverage.
Who This Coverage Is Most Important For
Builders Risk is especially critical for:
- General contractors
- Owners funding new construction
- Developers and investors
- Custom home builders
- Commercial and multi-family projects
- Lender-required construction projects
If you’re relying on assumptions instead of documented coverage responsibility, that’s a risk worth addressing now.
Planning a project or reviewing contract insurance requirements?
We help contractors and owners structure Builders Risk the right way, before there’s a loss.
Coverage availability, terms, and conditions vary by insurer and policy form. All coverage is subject to underwriting approval and the actual policy language.
