Factors to Consider When Purchasing Builder’s Risk Insurance

Building a house or a building can be an overwhelming and nerve-wracking experience. Every owner wants their property secured from harm. Builder’s risk insurance is ideally suited for this purpose, and it could be the best insurance option to put your client’s mind at ease.

Before purchasing builder’s risk insurance, your clients should be aware of its benefits in terms of coverage and risk mitigation. This will help them determine if this type of insurance is a good fit for them depending on their needs. In this article, we discuss builder’s risk insurance’s coverage and cost benefits.

What is builder’s risk insurance?

Builder’s risk insurance protects your clients from potential loss or damage to property being constructed or renovated. It applies to existing properties or new construction projects. Builder’s risk offers protection against loss or damage resulting from fires, storms, vandalism, theft, and other incidents. This type of insurance protects against risks that usually aren’t covered by policies for existing buildings in use.

Who is builder’s risk insurance for?

This insurance is ideally suited for those that have a financial interest on property that is currently being built or renovated. There are instances wherein builder’s risk insurance is required to get a building permit, so it’s best to be prepared and aware of specific laws in that particular state.

Most contractors avail of builder’s risk to ensure sufficient risk coverage for a structure. In some cases, coverage extends to other individuals who have a financial interest in the project.

What does builder’s risk insurance cover?

Builder’s risk insurance protects ongoing construction projects from unforeseen damages or losses. Most providers cover the cost of construction materials and loss of revenue related to property-related damages.

Here are some risks that are typically covered by builder’s risk insurance:

  • Lost sales
  • Rental income
  • Real estate taxes
  • Vandalism
  • Additional interest on loans
  • Explosions
  • Fire
  • Lightning
  • Theft
  • Hail
  • Hurricane
  • Fire
  • Vehicle collisions
  • Smoke
  • Construction materials (including damaged materials and materials lost in transit to the construction site)
  • Temporary structures
  • The property itself
  • Documents (including project plans or blueprints that have been destroyed or misplaced)

Builder’s risk insurance is especially beneficial for projects such as remodeling, installation, addition, and even construction of new residential or commercial properties.

For new construction projects, it’s advisable to obtain coverage for site preparation, underground pipes, scaffolding, and temporary structures. Neglecting to get these insured could lead to costly replacement or repair costs in case unexpected loss or damage occurs. Your client should also consider getting coverage for the contractor’s tools and equipment.

What builders’ risk doesn’t cover

Builder’s risk insurance can protect your client from many risks. But it is important to be aware that there are exceptions to these policies. In some cases, your client may have to purchase an extension for items that aren’t covered by the basic builder’s risk policy.

Some of the common exclusions in such policies are:

  • Employee theft
  • Mechanical breakdowns
  • Rust and corrosion
  • Acts of terrorism and war
  • Damages caused by war
  • Damages that occur outside of normal construction operations
  • Wear and tear
  • Damage due to faulty design
  • Workmanship and materials

Your client should be aware of these exclusions so that they can decide whether additional insurance is necessary.

How much does builder’s risk insurance cost?

The cost of builder’s risk insurance depends on many factors, including the construction budget. Insurance providers usually price it within 1% to 5% of the total cost of construction.

Some of the factors that can affect the cost of builder’s risk insurance are:

  • Cost, location, and duration of the project
  • Total square footage of the construction site
  • Total coverage amount
  • Quality of the materials used
  • Experience and expertise of the contractors
  • Project logistics


Builder’s risk insurance is perfect for your clients who are currently financing a construction project or have plans to in the future. Before agreeing to the policy, your client should read the terms thoroughly to ensure that everything discussed was laid out in the contract.

If there are terms your clients aren’t clear about, discuss these with them to avoid any misunderstanding. It’s also important for your client to know when exactly the insurance policy begins and ends.

About Snyder Specialty

Snyder Specialty, LLC is a New York-based underwriting facility that provides a range of property and liability solutions for personal and commercial lines. Specializing in coastal properties and hard-to-place risks, Snyder Specialty expands your current capabilities with proven solutions for complex risks. Find out more about the company’s range of services by calling (718) 362-8039.