Builders Risk Coverage Guide
What Builders Risk Insurance Covers — The Complete Breakdown
Before you break ground, you need to know exactly what your builders risk policy will and won’t pay for. We’ve reviewed thousands of builders risk claims — here’s what the policy covers and where the real gaps are.
- ✓Structure, materials, and in-place work all covered
- ✓Open perils form — broadest available coverage
- ✓Optional endorsements for flood, earthquake, soft costs
- ✓Same-day quotes — we explain every coverage detail
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✓ Same-Day COI
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What Property Does Builders Risk Cover?
Builders risk is a property policy — it covers physical property associated with a construction project. The policy typically uses an “insured project” definition that includes several categories of covered property.
The Structure Under Construction
The building itself — from foundation through framing, mechanical rough-in, drywall, finishes, and all work in place — is the primary insured property. As the structure grows in value, your coverage grows with it (since policy limits are typically set at completed project value from day one).
Materials and Supplies On-Site
Lumber staged on the lot, HVAC equipment delivered but not yet installed, plumbing fixtures, flooring, windows — all of it is covered while it’s at the job site. This is one of the most valuable parts of the coverage for active construction projects. Material theft is rampant on open job sites, and a single weekend can cost tens of thousands in stolen goods.
Materials in Transit
Most builders risk policies extend coverage to materials while they’re in transit to the job site — in a delivery truck, on a flatbed, or being moved between the staging area and the build location. This transit coverage typically has a sub-limit separate from the main policy limit. We always review this limit against the value of your largest single material shipments.
Temporary Structures
Scaffolding, temporary fencing, site trailers, and construction offices may be covered under builders risk if they’re listed or included in the policy. Coverage for temporary structures varies significantly by carrier — some include it automatically, others require an endorsement. We confirm this specifically when quoting renovation and commercial projects.
Covered Perils: What Causes of Loss Are Included?
Standard builders risk policies are written on an “open perils” or “all-risk” form — meaning coverage applies to all perils except those specifically excluded. Here are the major perils that are covered:
The original and most fundamental covered peril. Includes fire damage from hot work, accidental fire, and arson (by third parties). Explosion from gas lines or equipment is also covered.
Standard coverage for windstorm and hail damage to the structure and materials. An open frame building with no sheathing is extremely vulnerable to wind — this coverage is essential from framing through close-in.
Theft of materials, fixtures, and installed equipment by third parties. Sub-limits commonly apply — often $50,000–$100,000. Employee theft is typically excluded and requires a crime policy.
Deliberate damage to the project by third parties. Graffiti, broken windows, intentional destruction of materials — all covered. Particularly important for vacant lots and projects in urban areas.
Direct lightning strikes causing fire, structural damage, or electrical damage to installed systems are covered. Lightning is a significant peril during summer construction season.
Structural collapse during construction — from overloading, hidden decay, or construction error — is typically covered. This is broader coverage than most standard commercial property policies provide.
Perils That Require Endorsements
These perils are not covered by the standard policy form but can be added with the right endorsement. Whether you need them depends on your project location and risk profile:
Standard builders risk excludes flood. Projects in FEMA flood zones or coastal areas need a flood endorsement or separate NFIP builders risk policy. Lenders in flood zones will require it.
Earthquake is excluded from standard coverage. Projects in seismic zones (California, Pacific Northwest, New Madrid fault states) need earthquake coverage added. This endorsement carries a separate, usually higher deductible.
Covers architect fees, engineer fees, permit re-applications, and additional loan interest incurred after a covered physical loss delays your project. Essential on any project where delay creates significant carrying costs.
For commercial projects with anticipated rental income or operating revenue, delay coverage replaces income lost because a covered loss pushed back your opening date.
What Builders Risk Does NOT Cover
Understanding the exclusions is as important as understanding what’s covered. We’ve seen claims denied on every one of these — know them before you need them.
The policy doesn’t cover the cost to tear out and redo defective work. It may cover resulting damage caused by faulty workmanship (like a fire caused by improper electrical work), but the faulty work itself is excluded.
Hand tools, power tools, and equipment brought to the site by contractors don’t become part of the building — they’re excluded from builders risk. Contractors need inland marine / tools and equipment coverage for their own gear.
If someone gets hurt on your job site, that’s a general liability claim — not a builders risk claim. Builders risk is property insurance only. Your GL and workers comp handle the injury side.
Theft of materials or tools by your own employees is excluded under builders risk. This requires a crime policy with employee dishonesty coverage — a separate policy entirely.
Standard catastrophic exclusions apply to all property insurance including builders risk.
On renovation projects, damage to the pre-existing building is excluded unless you specifically add existing structure coverage. This is one of the most commonly missed gaps on renovation projects.
Why Trade Safe Reviews Every Coverage Detail With You
We’ve had clients come to us mid-project who thought they had soft costs coverage — they didn’t. They thought their policy covered flood because they were near a river — it didn’t. These aren’t hypotheticals. They’re conversations we’ve had after losses happened. Our process is to go through the coverage form with every new client before we bind the policy — so you know what you have, what you don’t, and whether you need additional endorsements for your specific project risk.
We also track your project completion date and reach out proactively when your expiration is approaching — because a lapsed policy is an uninsured construction project, and that’s a problem we’ve helped too many clients avoid at the last minute.
Coverage FAQs
Does builders risk cover materials stored off-site?+
Does builders risk cover fire damage?+
Does builders risk cover mold or water intrusion?+
Is collapse a covered peril?+
What is the difference between named perils and open perils builders risk?+
Does builders risk cover rental equipment on the job site?+
Know Exactly What Your Builders Risk Covers Before You Break Ground
We review the coverage form with every client. Same-day quotes, lender-acceptable binders, all project types nationwide.