Builder’s Risk Insurance: How It Works, Where to Get It
Builder’s risk insurance covers property and construction materials during a construction or renovation project.
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Builder’s risk insurance protects property and materials during a construction or renovation project. It can pay out in case of fire, vandalism or other unexpected events.
If you have a financial stake in a construction project, you should have builder’s risk insurance coverage. Your construction agreement should specify whether you, a contractor or someone else buys the policy.
Builder’s risk is a specialized kind of business insurance. You’ll probably need to work with an insurance agent to compare quotes and get coverage.
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Best builder’s risk insurance companies
Builder’s risk insurance is highly specialized, so not every business insurance company sells it. You also generally can’t get a quote online — you’ll likely need to work with an insurance agent, ideally one who has some familiarity with the construction industry.
Here are the top insurance companies for builder’s risk insurance:
Chubb
Chubb is a longstanding insurance company that offers virtually every type of business insurance. Their builder’s risk insurance policy includes coverage for:
- Projects abroad, as long as the company is based in the U.S.
- Green endorsements.
- Tailored policies for infrastructure projects like bridges and tunnels.
Chubb doesn’t offer online quotes for builder’s risk policies. You can use Chubb’s website to find an insurance agent near you. Read NerdWallet's review of Chubb business insurance.
The Hartford
The Hartford boasts that it helped insure the construction of the Hoover Dam. It's a great choice for broad builder's risk coverage. Policies can include:
- Up to $100,000 for blueprints, schematics and other valuable documents that are associated with the project.
- Up to $100,000 for debris removal.
- Contract penalties up to $50,000 if you owe fines or legal fees as a result of delays in the construction project.
- Expedited costs up to $25,000 if you experience a loss and need to expedite new supplies or quickly hire additional labor.
- Trees, shrubs and grass.
The Hartford doesn’t offer online quotes for builder’s risk insurance, so you’ll need to contact a local independent agent. Read NerdWallet's review of The Hartford business insurance.
Travelers
Builder’s risk insurance from Travelers stands out because the value of covered property is based on its replacement value, not its actual cash value. That often means you’ll recoup more of your losses. Beyond that, this builder’s risk insurance includes:
- A default limit of $100,000 for soft costs, like permitting, insurance on a loan or consulting fees.
- Coverage for permanent fixtures and temporary fixtures, such as signs and scaffolding.
- Automatic green building coverage.
Travelers insurance is sold through a network of independent insurance agents. Use the Travelers website to find an agency near you. Read NerdWallet's review of Travelers business insurance.
Save up to 30% on business insurance
NerdWallet Small Business helps you get real-time quotes from 30+ insurers, and instant access to your Certificate of Insurance (COI) through our partner, Coverdash.
Who needs builder’s risk insurance?
Builder’s risk insurance provides important coverage for anyone with a financial interest in a property you’re building or renovating. That includes:
- Building owners.
- Architects or engineers involved with the project.
- Contractors or subcontractors.
Depending on your construction contract, either the general contractor or property owner generally has to purchase builder’s risk insurance. The other party and subcontractors may be listed as additional insureds.
What does builder’s risk insurance cover?
In general, builder’s risk insurance covers the property on construction sites, like lumber, bricks, plumbing and electrical materials. It can pay out if it’s damaged or destroyed by fire, wind, vandalism, vehicle collisions or other accidents.
Some policies also cover construction materials stored off-site and cleanup costs like debris removal.
But there’s no standard template for a builder’s risk policy. As a result, coverage can vary a lot by provider. Here's what to look for in your policy:
What materials can be covered if they’re damaged or destroyed?
Generally, builder’s risk insurance policies will cover:
- The building that is under construction.
- Items in transit to the construction site.
- Materials being stored on site, like in trailers or temporary sheds.
- Temporary structures, like scaffolding and fences.
Some policies also include soft costs. These are the other costs you incur when your project gets delayed — like penalties owed to the local government, additional interest on your construction loan and extra fees to your architect.
What other costs are covered?
You can tack additional coverage onto your builder’s risk insurance policy by adding endorsements. Some insurers include these from the start. In other cases, you’ll have to ask to add it on.
Common builder’s risk endorsements include:
- Replacing lost or damaged documents or data.
- Debris removal.
- Pollutant cleanup.
- Cold and hot testing, which check how equipment performs under perfect conditions and working conditions, respectively.
- Delays that result from building code or ordinance changes over the course of a project.
- The costs of certifying or re-certifying a property as energy-efficient.
Adding endorsements will usually make insurance more expensive. But if one of these ends up covering you after a loss, it may be cheaper in the long run.
What causes of loss are covered?
Builder’s risk policies usually provide all-risks coverage. That means they cover property damage caused by anything except what the policy specifically excludes.
Common exclusions include floods and earthquakes. Business property insurance policies usually leave these out. You can sometimes purchase add-on coverage for those risks, though.
What doesn’t builder’s risk insurance cover?
Builder’s risk policies generally don’t cover damage to:
- Land.
- Trees, shrubs and vegetation on the property.
- Roads or walkways.
- The construction company’s tools and equipment.
You might not be covered depending on the source of the damage. In addition to floods and earthquakes, builder’s risk insurance policies often exclude:
- Employee theft.
- Damage caused by work vehicles,
- Manufacturing defects or flaws in workmanship or design.
- Ordinary wear and tear.
Once construction is complete, a builder’s risk policy ends. After that point, you’ll need:
- Business property insurance, to cover the structure and its contents in case of fire, theft, hail or other accidents.
- Inland marine insurance, to cover materials and products while they’re in transit.
How much does builder’s risk insurance cost?
The cost of builder’s risk insurance typically ranges from 1% to 5% of the total construction budget, according to New Jersey-based Liberty Insurance. The company says most oif its clients pay $100 to $300 per month or $1,000 to $5,000 per year.
Your construction budget includes:
- The total value of the completed building, excluding land value.
- Materials costs.
- Labor costs.
Beyond that, builder’s risk insurance policies can vary depending on:
- Location. Some places are more prone to natural disasters than others, for instance.
- Timeline. The longer a project goes on, the more opportunities you have for losses.
- Size of the construction site. Bigger sites probably have more materials that need coverage.
- Expertise and experience of the contractors and subcontractors who will be handling the project.
- Amount of coverage. In general, the higher your limits, the higher your premium will be.
- Whether the policy will cover the actual cash value of damaged property or the replacement value. The latter usually results in higher payouts. but also higher premiums.
- Quality of materials used in the construction. Pricier materials are more expensive to insure.
- Logistics of the project, such as where construction materials are stored.
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