If you’re starting a construction project, figuring out whether you need a builder’s risk policy depends on a few things. Who owns the land, how extensive the project is, and where your standard homeowners insurance leaves off all play a role.
Builder’s risk insurance is a specialized insurance policy designed to protect your home during a renovation or new construction. Whether you’re planning a remodel, building a custom home, or starting new construction from the ground up, it’s common to wonder if the contractor should carry the policy or if you, the homeowner, are responsible for obtaining a builder’s risk policy.
Below, we’ll walk through what this coverage typically includes, what it doesn’t, and when a builder’s risk policy makes sense.
And if you’d like help sorting through your options, C.T. Lowndes is your local agency, ready to help you explore builders risk insurance solutions with confidence.
What Is Builder’s Risk Insurance?
Builder’s risk insurance is a type of insurance made specifically for homes that are under construction or renovation. A builder’s risk policy is temporary. It only lasts while the work is happening and ends once the project is done or the house is occupied, and may be extended if necessary .
Why Homeowners Insurance Usually Isn’t Enough
This surprises a lot of homeowners.
Most homeowners insurance policies are not built to handle major construction. Once you start a renovation or new construction, your standard policy limits coverage or doesn’t cover the project altogether.
Why? Because construction changes the risk:
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There’s a higher chance of theft
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Materials may be stored on-site
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The structure might be partially exposed
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Contractors and builders are constantly coming and going
That’s where builder’s risk insurance fills the gap. It provides coverage that regular homeowners insurance simply wasn’t designed to handle.
Who Should Think About Builder’s Risk?
If you’re a homeowner with a financial interest in a building project, builder’s risk is worth considering and, in some cases, required.
Lenders require a builder’s risk policy for new construction before they’ll release funds, since it helps protect the value of the property while it’s being built.
This often applies to:
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New construction homes
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Large renovations or additions
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Projects where you’re acting as your own general contractor
In some situations, the contractor may purchase the policy. However, if you own the land or the loan is in your name, the lender will usually expect you, as the property owner, to secure a builder’s risk policy in your name.
This helps ensure the coverage aligns with your financial interest in the project and meets lender requirements.
If you’re unsure who should be responsible, a local insurance agent can help review your project so there are no surprises once work begins.
What Does Builder’s Risk Insurance Cover?
Every builder’s risk policy is a little different, but many provide coverage for common construction risks like:
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Fire
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Theft of materials
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Vandalism
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Certain natural disasters
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Accidental property damage
Covered property usually includes the structure itself, construction materials, and sometimes temporary structures.
If a loss occurs, the insurance policy helps reduce financial loss and keeps the project from stalling.
What’s Usually Not Covered?
Like all insurance, builder’s risk has limits. Common exclusions may include faulty workmanship or design errors.
Some natural disasters may also be excluded depending on your location and carrier. This is why discussing coverage details up front is so important. Adequate coverage means fewer surprises later.
How Much Does Builder’s Risk Insurance Cost?
Builder’s risk insurance cost depends on a few factors but most often ranges between 1% and 5% of the total completed project value.
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The total cost of the project
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Your location
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The type of construction
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How long the project will take
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Security at the job site
For many homeowners, the cost is a small part of the overall construction budget. When you compare it to the potential cost of replacing stolen materials or repairing property damage, it often feels like a smart trade-off.
Who Buys the Policy?
This depends on the project and the contract.
A builder’s risk insurance policy may be purchased by:
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The homeowner
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The general contractor
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The builder
What’s most important is that everyone understands who is responsible and that the coverage protects the right interests.
How Long Does a Builder’s Risk Policy Last?
A builder’s risk policy is meant to be temporary and usually lines up with the expected length of your project. Most insurance companies set the policy term based on your construction timeline at the start.
If the work takes longer than planned, extensions are typically available. Be sure to contact your agent before the policy expires.
If coverage lapses and a loss occurs during that time, the insurance carrier won’t be able to reinstate the policy retroactively.
As a general guideline:
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3 to 6 months often works for smaller renovations or additions
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6 to 12 months is common for larger builds or full new construction
Builder’s Risk vs. Other Property Insurance
Builder’s risk insurance isn’t the same as homeowners insurance or standard property insurance. It’s meant for the construction phase only.
Once the build or renovation is complete, coverage usually transitions back to a homeowners insurance policy. Making sure that transition happens smoothly is another reason to work with a knowledgeable insurance agent.
Do You Really Need Builder’s Risk Insurance?
If your home is under construction or major renovation, the honest answer is often yes. Construction comes with risks, and standard homeowners insurance usually doesn’t provide enough protection during that phase.
A builder’s risk insurance policy helps protect your property, your materials, and your finances while work is underway. It’s one of those things you hope you never need, but you’ll be glad it’s there if something goes wrong.
Get a Quote for Builder’s Risk Insurance
Building or renovating a home is exciting, but it also comes with plenty of moving parts. Builder’s risk insurance gives homeowners peace of mind during one of the most unpredictable stages of ownership.
If you’re planning a construction project and want to make sure you’re properly protected, reach out to C.T. Lowndes. Our team can walk you through your options and help you choose the right insurance policy so you can be excited about your project, not worry about what could go wrong.
