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. Trade Safe writes builders risk policies for new construction, renovation, and rehab projects alike, with a policy term that matches the actual construction schedule.

• ✓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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