Builders risk insurance - also called course of construction insurance - is a specialized property insurance policy that covers a building or structure while it is under active construction, renovation, or expansion. It protects the financial interests of owners, general contractors, lenders, and subcontractors from loss caused by fire, theft, vandalism, weather events, and other covered perils before the project reaches completion.
Builders risk insurance is a specialized property policy that covers a building or structure under active construction, renovation, or expansion against fire, theft, vandalism, and weather events before the project reaches completion.
Builders risk is a standard fixture in construction contracts and development agreements. Getting it right on the COI requires knowing who carries it, what limits apply, and exactly what the contract demands.
What Builders Risk Insurance Covers
Builders risk policies cover the structure being built along with materials, supplies, and equipment associated with the project while on-site, in transit, or temporarily stored nearby. Covered perils under an all-risk (open peril) form typically include fire and lightning, windstorm and hail, theft, vandalism, water damage from sudden and accidental events, and collapse. Named peril forms are narrower and cover only the causes explicitly listed - all-risk is generally the preferred and more commonly required form.
Some contracts also require the policy to cover soft costs such as architect fees, permit fees, and construction loan interest that would be incurred if a loss required starting over. Soft costs are not automatically included - they require a specific endorsement or a separate policy.
What Builders Risk Does Not Cover
Standard builders risk policies exclude earthquake and flood (both require separate coverage), design errors (covered by professional liability), contractor liability to third parties (covered by general liability), employee theft, and damage to completed portions of the project once they are put to their intended use or formally accepted by the owner. Understanding these exclusions is critical when drafting or reviewing insurance requirements in construction contracts, because coverage gaps must be addressed through other policy lines.
Who Carries Builders Risk
Construction contracts specify whether the project owner or the general contractor is obligated to obtain and maintain builders risk. When the owner carries it, coverage typically extends to the GC and subcontractors as named or additional insureds. When the GC carries it, the owner and lender should be confirmed as covered parties. Lenders with a financial interest in the project commonly require to be listed as mortgagee or loss payee.
Coverage amounts are written at the completed value of the project - the full replacement cost when finished. Underinsuring a project creates coinsurance exposure: if a $10 million project is insured for $7 million and a total loss occurs, the insurer may only pay 70% of the claim. Coverage amounts should be reviewed and adjusted as project costs increase during construction.
Why Contracts Require Builders Risk
Construction contracts require builders risk because standard commercial property policies exclude property under construction and general liability policies cover bodily injury and third-party property damage - not the project itself. Without builders risk, a fire or theft event that destroys partially completed work leaves all parties exposed to losses that no other policy will cover.
Lenders routinely make builders risk a condition of the construction loan, requiring evidence of coverage before any draws are released. Project owners require it contractually to ensure their capital investment is protected regardless of which party causes a covered loss.
How to Verify Builders Risk on a COI
Builders risk coverage is typically evidenced on an ACORD 28 (Evidence of Commercial Property Insurance) rather than the ACORD 25, though it may appear in the "Other" coverage section of an ACORD 25. When reviewing for compliance:
- Confirm the policy identifies the specific project address or description
- Verify the coverage amount equals or exceeds the contract or completed project value
- Check that the policy period extends through project completion and owner acceptance
- Confirm all required parties are listed - owner, GC, lender, and major subcontractors as applicable
- Identify whether the form is all-risk or named peril, and confirm it matches the contract requirement
- Check for any required additional coverages such as flood, earthquake, or soft costs
Common Compliance Mistakes
Policy expires before project completion. Construction schedules slip. A builders risk policy that expires mid-project leaves an uninsured gap that no other coverage fills.
Coverage amount not updated as costs increase. Material and labor cost escalation is routine. A policy written at original budget may be materially underinsured by the time of a loss.
Wrong parties listed. The lender is not listed as mortgagee. Subcontractors are not named. The owner accepts a COI that covers the GC only.
Missing soft costs endorsement. The contract requires soft costs coverage; the policy does not include it.
How Bramble Helps
Bramble reads the builders risk requirements in your construction contracts - coverage form, project-specific limits, required covered parties, and policy period - then compares them against submitted COIs and ACORD 28s, flagging gaps before they become a problem. Given that 70% of COIs are non-compliant at first submission, automated review catches what manual spot-checks miss.
Visit getbramble.com to see how Bramble handles construction insurance compliance at scale.