Builders Risk Answer

What Is Soft Costs Coverage?

Soft costs coverage pays for the non-physical expenses that pile up when a covered loss pushes your project completion date back. It’s the coverage that most contractors don’t know they’re missing until they need it.

• ✓Pays for architect fees, permit costs, and additional loan interest
• ✓Optional endorsement — not included in standard builders risk
• ✓Can cover $50,000–$300,000+ in exposure on larger projects
• ✓We add it to every applicable policy by default

The Direct Answer

Soft costs coverage is an optional endorsement added to a builders risk policy that pays for non-physical expenses that increase because a covered loss delays the project completion. While the base builders risk policy covers physical damage — materials, structure, in-place work — it doesn’t pay for the financial obligations that continue to accrue during the rebuild period.

The name ‘soft costs’ refers to the non-physical project costs as opposed to ‘hard costs’ (materials and labor). After a covered fire, you need to pay the architect to re-design the damaged sections, re-apply for permits, continue paying interest on your construction loan, and maintain the project budget overhead — all before a single stick of new framing goes up.

Soft costs coverage pays for those expenses — up to the endorsement limit — when they result directly from a covered physical loss. The trigger is always a covered property claim under the builders risk policy. Non-covered causes of delay (supply chain issues, permit denials unrelated to a loss, owner changes) don’t trigger soft costs coverage.

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