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When you’re starting a construction project, it is imperative you have some sort of protection in case of damages or destruction to the equipment and property, both of which are not uncommon. Having a builders’ risk insurance can offer that coverage. 

Read this detailed guide till the end to learn everything about it, including the cost calculation.

What’s Builders’ Risk Insurance & How Does it Work?

Sometimes known as a construction or commercial insurance, it offers protection against the contractor’s equipment, material, and property. It can cover many things ranging from fire, explosion, and theft to vandalism and even certain acts of GOD. However, ask your insurer about acts of GOD because some may not offer protection against them.  

Many contractors often don’t consider getting this policy resulting in hefty losses when equipment is damaged, or property is destroyed. These policies can be in the form of terms ranging from 3 to 12 months, depending on how long your construction job lasts.

Who Needs Builder’s Risk Insurance?

Any type of business or individual having a financial involvement in a construction project should consider builders’ risk insurance. Some of the most common types of candidates for this policy are:

  • General contractors
  • Lenders
  • Architects
  • Subcontractors
  • Property owners
  • House flippers
  • Development Companies
  • Builders

Things Covered By Builders’ Risk Insurance

Depending on your specific needs, you can add or remove coverage from the policy, but in general, a builders’ risk insurance covers damages to your property and equipment specified in the contract. It can also cover additional expenses and costs not directly concerned with the construction itself, such as:

  • Real estate taxes
  • Interest on loans
  • Rental income
  • Loss of sales

Some Coverage Extensions

Just like every policy, there are some limitations to the builders’ risk insurance. It doesn’t cover everything related to the construction by default, so you may have to get additional coverage for things such as:

  • Temporary structures
  • Scaffolding
  • Clean-up of debris and pollutants
  • Construction forms

You may or may not be able to get additional protection for the above-mentioned exclusions or any other construction-related risks depending on your policy. Ask your insurer about them.

Things That May Not Be Covered by Builders’ Risk Insurance

There are going to be some instances when your builder’s risk insurance will not offer protection against losses; some of them include:

  • Floods
  • Earthquake
  • Beach zones
  • Strong winds
  • Wear & tear
  • War & terrorism
  • Corrosion & rust
  • Equipment breakdown

Be sure to contact your insurance company and ask about the exclusions before signing that policy form.

Cost of Builders’ Risk Insurance

Just like other policies, this depends on your specific coverage needs. Generally, the cost of builders’ risk insurance ranges from 1-4% of the total cost of construction. Some factors that insurers look at when calculating the costs include:

  • Project type
  • Coverage amount and tenure
  • Materials for construction

Figuring out your overall construction budget and finding out its 1-4% is an excellent way to have an idea of the lowest and highest policy cost. 

Ready to Get Your Builders’ Risk Insurance? Contact Us

To learn more about commercial insurance please be sure to reach out to our team at 860-684-5270 or visit our website at