As a general contractor or artisan contractor, having proper insurance is crucial to protecting your business from financial risks that could arise during construction projects. Builders risk insurance specifically covers potential property damage to building projects while under construction. Without this coverage, a single incident like a fire, storm or theft could lead to major uninsured losses.

This comprehensive guide will explain everything general contractors and artisan contractors need to know about securing optimal builders risk insurance. Key topics include:

  • What Is It?
  • Why Do You Need It?
  • What Does It Cover?
  • What’s NOT Covered?
  • Required Policy Limits
  • Cost Factors
  • Ways to Reduce Premiums
  • Safety Tips to Lower Costs
  • How to Obtain Coverage

Read on for a complete overview of builders risk insurance and why having the right policy in place is so important for contractors.

What is Builders Risk Insurance?

Builders risk insurance provides property coverage for building projects under construction, renovation or repair. It covers losses to the structure itself as well as materials, fixtures, equipment, supplies and tools at the construction site against damage from causes like fire, theft, vandalism, windstorms and collapse.

For example, if a partially constructed home is destroyed halfway through the project due to a fire, builders risk insurance would cover the costs to rebuild and complete the home. Or if materials are stolen from the site, the policy pays to replace them.

Builders risk protects against financial catastrophe if a covered event destroys or damages a construction project. It provides crucial protection unique from standard property insurance.

Why Do Contractors Need Builders Risk Insurance?

Construction projects involve substantial property risks each day work is underway on site. Power tools, volatile materials, weather elements and theft all pose dangers to ongoing projects. Some examples include:

  • Fire damage from electrical wiring, equipment sparks or flammable materials.
  • Storm damage from high winds, rain/flooding or weight of snow/ice.
  • Vandalism or theft of tools, materials, equipment or the structure itself.
  • Foundation sinking or collapse during excavation work.
  • Accidental damage from worker mistakes, equipment failures or design issues.

With so many threats, having builders risk coverage in place allows contractors to promptly repair, rebuild or replace any damage without major out-of-pocket costs. It covers the huge expenses if disaster strikes.

Builders risk is designed for the unique exposures contractors face during construction that standard property policies exclude. Without it, you retain all the financial risks.

What Does Builders Risk Insurance Cover?

Builders risk policies are designed to cover property losses and damages related to construction projects. Coverages typically include:

Materials & Supplies – Covers lumber, hardware, fixtures, plumbing and electrical components, roofing materials, bricks, tools and all other materials on site to be installed.

Equipment & Machinery – Covers cranes, bulldozers, backhoes, generators and all contractor owned equipment and machinery used at the site.

The Structure Itself – Covers damage to the building or structure under construction as work progresses.

Offsite Storage – Covers materials or equipment stored at an offsite warehouse or storage facility.

Soft Costs – Covers expenses like architect fees, permits, additional financing costs and other delays caused by an insured loss.

Debris Removal – Covers costs to demolish damaged structure, clean the site and haul away debris after a loss.

The broad coverage builders risk insurance provides for construction projects in progress makes it an essential policy for general contractors to carry.

What’s NOT Covered by Builders Risk Insurance?

While builders risk policies provide broad protection, some exclusions apply:

  • Damage due to wear and tear, rust, rot, fungus or exposure to normal weather.
  • Losses occurring after the project is completed and handed over.
  • Tools, equipment, materials or supplies off the described job site.
  • Contractor machinery like bulldozers and cranes when away from the site.
  • Damage caused by improper materials, workmanship or design flaws.
  • Losses resulting from contractor’s delay or lack of performance.

Since builders risk has limitations, contractors need general liability and other policies too. But builders risk delivers specialized value protecting new construction projects themselves.

What Are The Required Policy Limits?

Experts recommend contractors carry builders risk policy limits adequate to cover 100% of the completed value of the project, plus materials and equipment values. This ensures you have sufficient funds to promptly rebuild and continue the project if a covered loss occurs.

For residential contractors, a $500,000 per occurrence limit may be adequate for smaller homes. But for large custom homes or commercial projects, higher per occurrence limits like $2 million to $5 million or more should be secured.

Consult your insurance agent to determine appropriate limits based on the size and scale of construction projects your business takes on. Never take shortcuts when protecting major projects.

What Does Builders Risk Insurance Cost?

These policies usually run about 1-3% of total construction costs for smaller projects and 2-5% for larger projects. So for a $1 million custom home build, you’d pay $10,000-$30,000 to guard against storms, fires, thefts and other mishaps. Larger or more complex projects like a $10 million custom home may pay up to 5% for robust protection, including extensions.

While that may sound steep, it beats losing your entire investment! A standard policy will typically range from 1-3%, while extensions for larger projects will typically add an additional 1-2%. In the end, $1,000-$5,000 per $100,000 spent is a small price to pay for peace of mind.
With builders risk insurance, you can rest assured your dream project is in good hands. The best policies even cover materials in transit and damage from design defects. So you can watch your vision take shape, knowing there’s a safety net below.

Worth noting – Builders risk insurance premiums are typically paid monthly over the policy term, which represents the main cost obligation for policyholders. As long as no claims are filed, the monthly premium payments are the only builders risk insurance expenses that contractors pay out of pocket. Even though premiums are determined upfront for the full policy period, dividing them into monthly installments helps spread out the cost burden. For most contractors, paying premiums month-to-month is more feasible than one lump sum payment each policy term.

The cost of builders risk insurance can vary substantially based on these key factors:

Project Size – Larger construction projects have greater total values at risk, so premiums rise accordingly. Custom homes over $1 million may pay over $15,000 in premium.

Project Type – More complex and hazardous projects like high-rises, factories and chemical plants have greater exposures, so premiums run higher.

Covered Perils – Policies with basic named peril coverage cost less than blanket coverage protecting against all risks except exclusions.

Deductible – Choosing a higher deductible lowers premiums, but don’t go so high that out-of-pocket costs would be difficult to pay in the event of a loss.

Location – Geographic region also impacts premium factors. Coastal areas susceptible to hurricanes or regions prone to earthquakes/wildfires have higher premium rates.

Safety Record – Contractors with excellent safety protocols may qualify for discounted premiums on builders risk due to lower expected losses.

For optimal premiums, working with an independent agent who can access multiple specialized insurers offers potential cost savings. Never simply accept the first premium quoted. Understanding the cost of builders risk insurance for contractors is crucial for financial planning in construction projects.

5 Ways Contractors Can Reduce Their Premiums

Because builders risk represents a major project expense, controlling premium costs is important. Strategies to lower your rates include:

1. Increase Deductibles – Choosing higher deductibles like $10,000 or $25,000 reduces premiums, but don’t go so high it would be a burden if a loss occurred.

2. Install Protective Devices – Adding fencing, security cameras, fire extinguishers, and other protective measures at sites helps justify lower premiums to insurers.

3. Maintain Good Loss History – Few past losses help keep your premiums low long-term. Too many claims leads insurers to perceive you as high risk.

4. Offer Employee Safety Training – Documented training programs on topics like equipment safety, materials handling, fire prevention and securing job sites also help reduce premiums.

5. Inquire About Contractor Discounts – Some insurers offer premium discounts for builders who take risk management courses or implement formal safety plans.

The most significant way contractors control costs is investing proactively in safety and security at all job sites. Preventing project damage saves money over the long haul.

How Contractors Can Enhance Safety To Reduce Claims And Premiums

Making safety and loss prevention standard procedure – rather than just reacting to project damages after they occur – directly translates into achieving lower builders risk premiums. Proactive steps for contractors include:

Conduct Regular Site Inspections – Assign managers to inspect sites daily checking for slipping hazards, unsecured areas, fire risks, equipment issues and other threats.

Store Materials Properly – Keep lumber, bricks and other building materials neatly stacked, covered and secure from weather or theft. Eliminate fall and collapse dangers.

Secure Equipment – Lock down ladders, tools, generators, cranes and all valuable machinery on site or in locked storage facilities after hours.

Restrict Access – Use fencing, barriers and security staff monitoring to keep unauthorized individuals away from active construction areas and valuable equipment.

Enforce Fire Prevention – Prohibit smoking on site. Keep combustibles away from ignition sources and have extinguishers available. Don’t overload electrical circuits.

Document Site Status – Take photos and videos documenting site status each day in case damages arise, so causes can be determined.

Investing seriously in safety directly translates into achieving lower premiums over time while also preventing project delays. It pays dividends.

How Contractors Should Obtain Builders Risk Insurance

For help evaluating your construction risks and finding affordable builders risk insurance tailored to your projects, independent insurance agents are an invaluable resource. Avoid just going directly to insurance carriers’ websites for quotes. Quality agents provide key advantages:

Better Policy Options – Independent agents can access multiple specialized insurance carriers, not just a single company. This enables them to compare a wide range of coverage options to find you the optimal builders risk policy.

Superior Guidance – Agents well-versed in builders risk insurance can answer questions and explain how coverages apply to your projects. They simplify the process.

Proactive Loss Control – They provide expert loss prevention guidance tailored to building contractors, helping you implement effective safety programs that reduce claims.

Cost Savings – Independent agents have relationships with multiple insurers, allowing them to shop for and negotiate the most competitive premium rates.

Partnering with the right independent insurance agent delivers tremendous advantages for contractors seeking the right builders risk coverage at reasonable rates. Their expertise removes hassles and ensures you have ideal protection.


Builders risk insurance provides critical protection to general contractors and artisan contractors, helping shield them from major financial losses if projects under construction are damaged. It covers expenses to repair and rebuild. Learn more about the key aspects of contractors insurance for your business.

Yet finding the right policy at an optimal price requires expertise. Factors like project size, location, safety protocols and past claims all impact costs. We hope this guide provides invaluable assistance to contractors in learning the key role builders risk plays and how to maximize its value for your business. Don’t leave major construction projects inadequately insured. Please reach out with any other questions!