In construction, one uncovered loss can wipe out your entire project’s profit—or worse, your business. This guide shows contractors how to secure builders’ risk insurance in three days instead of three weeks, save on premiums through proper structuring, and avoid coverage gaps that can deny claims.
What You’ll Learn:
- How builders’ risk actually works (and when coverage really starts and stops)
- What endorsements are worth considering based on your project scope and timeline
- ContractorNerd’s modern process to get quotes, bind coverage, and start building
Whether you’re a general contractor breaking ground on a $10M commercial project or a residential renovation, ContractorNerd makes it easier to get comprehensive quotes and bind coverage in days, not weeks.
What Is Builders Risk Insurance?
Builders risk insurance (also known as course of construction coverage or contractors’ all-risk insurance) protects your project from damage during construction—from the moment materials arrive on site until the building is complete and occupied. Think of it as temporary property insurance for something that doesn’t exist yet.
Your standard general liability won’t cover the building you’re constructing. Your property insurance won’t touch it until it’s complete. That gap? That’s where builders risk lives.
Key Point: Builders’ risk is a type of property insurance, not liability insurance—it covers the structure and materials, not injuries or damage to others.
Understanding Your Builders Risk Policy Structure
No two construction projects are identical, which means builders risk policies are highly flexible documents. Nearly every aspect can be tailored to your specific project needs—and if you’re willing to pay for it, insurers will even write custom coverage provisions.
Every builders risk policy breaks down into four critical components that determine exactly what protection you’re getting:
- Covered Property – What physical assets the insurer will protect
- Excluded Property – Items specifically carved out from coverage
- Covered Events – Which disasters and incidents trigger a claim
- Excluded Events – Circumstances where the insurer won’t pay
Smart contractors review all four sections before binding coverage. Why? Because what looks like comprehensive protection at first glance might exclude the exact scenario that keeps you up at night. That testing damage that flooded two floors? Check section 4. Your expensive tools stolen from the site? That’s probably in section 2.
The bottom line: Standard policies are just starting points. Your actual coverage depends entirely on the specific language in your contract—never assume anything is included without verifying.
Here’s the combined and rewritten “Which Contractors Need Builders’ Risk Insurance?” section:
Who Needs Builders’ Risk Insurance?
The responsibility for purchasing builders risk typically falls to one of two parties: the project owner or the general contractor. Your construction contract should spell out exactly who’s responsible—never assume it’s covered by the other party.
Project Owners and Developers
Owners carry the greatest financial exposure—if disaster strikes, their entire investment could vanish overnight. This makes builders risk non-negotiable for:
- Any project with bank financing (lenders mandate it)
- New construction over $100,000
- Major renovations or additions
- Ground-up developments
Even if the GC offers to provide coverage, savvy owners often opt to purchase their own policy to ensure adequate limits and proper coverage terms.
General Contractors
GCs typically manage the insurance burden for the entire project, making builders risk part of their standard operating procedure. Beyond basic coverage, contractors should consider:
- Installation floater coverage for tools, materials, and equipment in transit or awaiting installation
- Higher limits for stored materials
- Extended coverage territories if fabricating off-site
You absolutely need coverage for:
- Government contracts (always required)
- Any project where you’re responsible per contract
- Projects where you have materials exposure before installation
Subcontractors—Don’t Assume You’re Covered
The biggest mistake subs make? Assuming the GC’s policy protects them. Unless you’re specifically named as an additional insured with proof of coverage, you’re exposed.
High-risk trades should always verify coverage or purchase their own:
- Electrical and plumbing – Hidden systems mean hidden liability
- HVAC – Complex commissioning with cascade failure potential
- Concrete/structural – Mistakes discovered months later
- Roofing – Maximum weather exposure during installation
If you have any financial stake in the project—whether you own it, are building it, or installing critical systems—you need builders risk protection either through your own policy or as a named insured on another. A quick contract review and a certificate of insurance can save you from catastrophic loss.
How Does Builders’ Risk Insurance Work for Contractors and Construction Companies?
The Coverage Timeline That Actually Matters
Builders risk isn’t like other insurance—timing is everything. Miss these triggers and you’re building without a net:
Coverage Starts When:
- Materials arrive on site OR
- You become legally responsible for the property OR
- Construction begins (whichever comes first)
Coverage Ends When (earliest of):
- Property is occupied (even partially)
- You’re paid in full
- Policy expires
- 90 days after substantial completion
- Property is put to its “intended use”
What’s Actually Covered with Builders Risk (And What Will Cost You)
Most builders’ risk policies are “all-risk” coverage—insurance-speak for “we cover everything except this long list of exclusions.”
You’re Protected From:
- Fire, lightning, explosion
- Theft and vandalism (by outsiders)
- Wind, hail (watch for named storm exclusions)
- Water damage from burst pipes
- Vehicle/aircraft collision
- Collapse during construction
- Materials in transit (usually 100-mile radius)
The Expensive Exclusions:
- Testing damage (floods during HVAC commissioning)
- Employee theft
- Faulty workmanship
- Earthquake and flood
- Mechanical breakdown
- Design errors
How Much Does Builders’ Risk Insurance Cost?
Every builders risk policy is priced based on your specific project’s risk profile—higher risk means higher premiums. Your rate depends on multiple factors: what you’re building (construction type), how much it’s worth (project value), how long it’ll take (duration), where it’s located, and what coverage you need.
A simple interior renovation costs far less to insure than a ground-up high-rise construction—fewer things can go wrong when you’re not touching the structure. Location matters too: projects near fire stations or in low-crime areas tend to pay less than those in remote sites or high-risk zones.
Generally, builders’ risk insurance runs slightly higher than standard property insurance, as it covers an active construction site with constant hazards, exposed materials, and incomplete structures. Most contractors budget 1-4% of their project value for insurance coverage, although complex or high-risk projects may require higher percentages.
Builders Risk Endorsements That Matter
Testing Coverage Endorsement
Almost every builders risk policy excludes damage during system testing—a potentially devastating gap in coverage.
Consider this: A plumber tests new pipes before leaving the site. A joint fails, flooding two floors. Without testing coverage? You pay for all damages out of pocket. With it? Insurance covers the loss.
The Testing Endorsement (form IM 7962 01 12) adds “Direct Physical Loss Resulting From Testing” to covered losses. Since every project requires system testing before completion, this isn’t optional—it’s essential protection for your profit margin.
Change Order Endorsement
Construction projects rarely end at their original budget. When clients add upgrades or expand the scope, the project value increases—but if they forget to update their coverage limits, they become underinsured when claims occur.
This endorsement automatically extends coverage for project increases, typically in increments of 10%, 20%, or 30% above the original insured value. It’s your safety net when change orders pile up and nobody remembers to call the insurance company.
Without it, that $100,000 upgrade your client approved mid-project won’t be covered if disaster strikes.
Ordinance or Law Endorsement
When damage occurs during construction, building codes may require upgrades that extend beyond simply repairing the damage. This endorsement covers those additional costs.
Example: A storm damages the roof of a nearly complete home. By the time repairs begin, new building codes require a different roofing system. With this coverage, insurance pays for the code-required upgrades. Without it, the owner pays thousands in unexpected costs out of pocket.
This coverage is automatically included for eligible new construction and renovation projects, excluding those involving the existing structure. For any other project, it’s worth noting that code changes occur frequently, and the additional costs can quickly escalate.
Expediting Expense Coverage
When a covered loss damages your project, this endorsement covers the costs of rush charges to get back on schedule, including overtime labor, expedited shipping, express freight, and emergency equipment rentals.
Without it, you face two bad options: eat the cost of acceleration or accept expensive delays. With this coverage, insurance funds the extra expenses needed to meet your original deadline.
Getting Builders Risk Quotes: What You Actually Need
Traditional agents will send you a 40-page application. Here’s what actually matters:
Information That Drives Your Rate
Construction Details:
- Exact construction type (this alone swings rates by 300%)
- Square footage and stories
- Project start and end dates
- Total project value (including soft costs)
Protection Factors:
- Distance to fire department/hydrants
- Site security measures
- Location and catastrophe exposure
Your Experience:
- Similar projects completed
- Loss history
- Years in business
Documents You’ll Need
- Construction contract or project proposal
- Site plan (for larger projects)
- Construction schedule
- Subcontractor list (for GCs)
Pro Tip: Overestimating completion time costs pennies. Underestimating can void coverage.
Traditional vs. Modern Builders Risk Insurance
The Old Way: 3-4 Weeks of Frustration
You’re familiar with the standard process with traditional agents. First comes multiple meetings to “understand your needs,” which really means they’re figuring out how to sell you their favorite carrier’s product. Then you’ll fill out separate 40-page PDFs for each carrier, essentially writing the same information three different ways.
After a week of waiting, you get incomplete quotes that raise more questions than they answer. The back-and-forth begins: clarifying construction type, explaining your subcontractor arrangements, and justifying your project timeline. When you finally agree on coverage, you’ll write a paper check or arrange a wire transfer, then wait another few days for it to clear. Three to four weeks later, you might have a policy—assuming nothing got lost in translation.
The worst part? The generic coverage often misses critical endorsements. You won’t discover this until you file a claim for testing damage and learn it’s not covered.
The ContractorNerd Way: 3 Days to Protection
We’ve rebuilt the entire process with technology that actually serves contractors, not insurance companies.
Day 1: Smart Application & Instant Quotes. One digital form replaces the PDF mountain. Within 24 hours, you’ll have bindable quotes from 15+ carriers competing for your business, not just the two or three an agent happens to like.
Day 2: Review & Optimize. Compare all your options side by side with clear explanations of what’s covered and what’s not. Our coverage specialists are actual construction insurance experts who understand the difference between joisted masonry and non-combustible construction. They’ll recommend endorsements based on your specific trade and project type.
Day 3: Pay & Bind. Pay digitally and receive binding confirmation—no more wondering if you’re covered. Digital policy documents arrive within days, not weeks later.
Builders’ risk shouldn’t be a last-minute scramble or a coverage surprise waiting to happen. With the right structure and the right partner, it becomes predictable protection that lets you focus on building, not worrying.
Buying Builders Risk with Traditional Agents vs. ContractorNerd
| Task | Traditional Agent | ContractorNerd |
| Application Process | 30+ pages of PDFs per carrier | Single smart form (15 minutes) |
| Initial Quote | 5-7 business days | Under 24 hours |
| Multiple Carrier Options | 2-3 carriers (their favorites) | 15+ carriers competitive quotes |
| Documentation Required | Fax or email everything | Digital upload once |
| Binding Process | Days of back-and-forth | Same-day binding |
| Payment | Paper check or wire | Digital (ACH/Credit) |
| Policy Delivery | 2-3 weeks | 2-3 days |
| Total Time to Coverage | 3-4 weeks | 3 days |
Ready to Build Protected?
With ContractorNerd’s modern platform, you’ll spend less time on insurance and more time building—with better coverage at lower cost.
Frequently Asked Questions
Q: How long does builders’ risk insurance last? A: Typically 3-12 months, renewable if your project extends. Most carriers offer 6- or 12-month terms with the option to extend.
Q: Can I add builders’ risk to my general liability policy? A: No, they’re separate policies covering different risks. General liability covers injuries and property damage to others; builders’ risk covers damage to your construction project.
Q: Does builders’ risk insurance cover my tools and equipment? A: Usually not. Most builders’ risk policies exclude contractor’s tools and equipment. You’ll need an inland marine or installation floater policy for those.
Q: Who pays for builders’ risk insurance—owner or contractor? A: It depends on your contract. Typically, whoever has the most financial risk pays. GCs often include it in their bid, while owners may purchase it directly for larger projects.
Q: Is builders’ risk insurance tax-deductible? A: Yes, it’s typically a deductible business expense for contractors. Property developers may need to capitalize it as part of the building’s cost basis. Consult your tax advisor.
Q: What happens if I don’t have builders’ risk insurance? A: You’re personally liable for any damage. A fire, storm, or theft could put your business at risk of bankruptcy. Most lenders and project owners require it anyway.
Q: Can I cancel builders’ risk insurance mid-project? A: Yes, most policies can be cancelled with written notice. You’ll receive a pro-rated refund for the unused premium. But don’t cancel until you have replacement coverage—gaps can be catastrophic.
Q: When does builders’ risk coverage start and end? Coverage begins when materials arrive on site or you assume legal responsibility for the property. It ends when the property is occupied, you’re paid in full, or 90 days after substantial completion—whichever comes first.
Q: What’s the difference between builders’ risk and general liability? Builders’ risk covers physical damage to the building under construction (property coverage). General liability covers injuries and damage you cause to others (liability coverage). You need both.