Builders Risk Knowledge
Common Builders Risk Exclusions — Know What the Policy Won’t Cover Before You Need It
Every builders risk claim we’ve seen denied traces back to an exclusion the contractor didn’t know about. Here are the most important gaps in standard builders risk coverage — and how to fill them.
- ✓Flood, earthquake, faulty work — all excluded by default
- ✓Employee theft, contractor tools — separate policies required
- ✓Existing structure on renovations — must be endorsed on
- ✓We review every exclusion with clients before binding
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The Exclusions That Cause the Most Claim Denials
A builders risk policy written on an open perils form covers all perils except those specifically excluded. That sounds broad — and it is. But the exclusions that apply are significant, and some of them cover some of the most common construction losses. Knowing them before a loss happens is the difference between a paid claim and a personal financial hit.
Flood is excluded from every standard builders risk policy. Rising water from a storm, overflowing creek, or storm surge is not covered. Projects in FEMA Special Flood Hazard Areas (SFHAs) need a flood endorsement or a separate NFIP builders risk policy. Lenders in those zones require it.
Earthquake damage is excluded. Projects in seismic zones — California, Pacific Northwest, New Madrid fault states — need an earthquake endorsement added. This endorsement typically carries a separate deductible, often expressed as a percentage of the insured value.
Builders risk does not cover the cost to tear out and redo defective work. A foundation that settles due to improper compaction isn’t covered. However — and this is important — resulting damage caused by faulty workmanship may be covered. A fire caused by an improperly installed gas line is a covered fire loss, even though the underlying defect isn’t covered.
Theft of materials or property by your own employees is excluded from builders risk. Third-party theft by strangers is covered. Employee theft requires a commercial crime policy with an employee dishonesty endorsement — a completely separate coverage.
Tools, equipment, scaffolding, and machinery that don’t become part of the permanent structure are excluded. Every contractor needs a separate inland marine / tools and equipment policy to cover their own gear.
The base builders risk policy on a renovation covers new work only. The pre-existing structure is excluded unless you specifically add existing structure coverage by endorsement. This is one of the most commonly missed gaps in renovation coverage.
If materials were obtained by someone using deception — a scam supplier, fraudulent purchase — the loss isn’t a covered theft event. Voluntary parting exclusions apply to situations where property left your possession without physical force.
How to Fill the Most Important Gaps
The key exclusions all have available solutions — either through endorsements on the builders risk policy or through separate coverage:
| Exclusion | Solution |
|---|---|
| Flood | Flood endorsement on builders risk or NFIP builders risk policy |
| Earthquake | Earthquake endorsement (separate deductible applies) |
| Employee theft | Commercial crime policy with employee dishonesty |
| Contractor tools | Inland marine / tools and equipment policy |
| Existing structure | Existing structure endorsement on builders risk |
| Liability | General liability policy (completely separate) |
Why Contractors Choose Trade Safe for Builders Risk
We turn around quotes and lender-acceptable binders the same day you call.
Independent agency — we shop every carrier with appetite for your project type.
We understand what gets claims paid and how to structure coverage that holds up.
We track your policy terms and contact you before coverage lapses.
Exclusions FAQs
What are the most common builders risk exclusions?+
Is flood always excluded?+
Does builders risk cover faulty workmanship?+
Is mold covered?+
Are contractor tools excluded?+
Does builders risk cover neighbor property damage?+
We Review Every Exclusion With You Before Binding — So No Surprises After a Loss
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