Builder's risk covers the building itself while it's under construction, against things like fire, wind, theft, vandalism, and water damage, plus the materials on site, off site, and in transit. It is usually bought by the owner, developer, or general contractor, not the subs, and it is property coverage on the structure, not liability coverage for injuries. As a sub, your job is to confirm you are named or included under the project's policy.
What builder's risk covers (course of construction)
Builder's risk, also called "course of construction" (or "Contractor's All Risk / CAR" in some markets), covers a structure while it is being built. Typical covered perils include fire, wind, theft, vandalism, water damage, explosion, and structural collapse.
It also covers the materials for the project: those stored on site, stored off site, and in transit to the job. In short, it insures the work-in-progress as property. The coverage runs during construction and ends when the project is complete and occupied, at which point a normal property policy takes over.
Who buys it
Practice varies by project and contract, but the buyer is almost always the party with the most at stake in the finished building:
- On owner or developer projects, the owner or developer usually buys it and names the general contractor as an additional insured.
- On design-build or contractor-financed projects, the GC often buys it.
Whoever buys it, the policy should be written to the full completed value of the project, so a total loss is actually covered.
What it does not cover
Builder's risk is property coverage, so several big things sit outside it:
- Liability for injuries or third-party damage. You still need general liability.
- Earthquake, flood, or hurricane, unless those perils are specifically endorsed onto the policy.
- Professional design errors, which are a professional liability (E&O) exposure.
- Equipment breakdown, which is a separate policy.
It is also not a warranty on defective work. If your workmanship is the problem, builder's risk is not the answer.
Soft costs
A covered loss does not just cost you the burned lumber. It costs you time, and time costs money. Many builder's risk policies include, or can endorse, "soft costs" coverage: the extra loan interest, delay penalties, and extended professional fees you rack up when a covered loss pushes the schedule back.
On financed projects where every week of delay has a real dollar cost, confirm whether soft costs are covered and at what limit.
Subs: confirm you're included, don't double-buy
Subcontractors are not expected to carry builder's risk for their portion of the work. So do not go buy a duplicate policy. Instead:
- Get written confirmation that you are named or included as an insured under the project's builder's risk policy.
- Know who to notify if there is a loss.
Here is why it matters: if a fire destroys your installed work before handover, the builder's risk policy is what responds, not your general liability. If you are not named or included, you can be left arguing about who pays for work you already completed and were counting on getting paid for.
Common questions
What does builder's risk insurance cover?
It covers a building while it is under construction against perils like fire, wind, theft, vandalism, water damage, and collapse, plus the project materials on site, off site, and in transit. It insures the work-in-progress as property and runs until the project is complete and occupied. It does not cover liability for injuries, and it usually excludes flood, earthquake, and hurricane unless those are specifically endorsed. It is property coverage on the structure, not a substitute for general liability.
Who is supposed to buy builder's risk, the owner or the contractor?
It depends on the project, but it is usually the owner, developer, or general contractor, not the subcontractors. On owner or developer jobs, the owner typically buys it and names the GC as additional insured. On design-build or contractor-financed jobs, the GC often buys it. Subs are not expected to carry it for their portion; they should confirm in writing that they are named or included under the project's policy so their completed work is covered.
Does builder's risk cover flood or earthquake?
Not by default. Flood, earthquake, and hurricane are typically excluded unless they are specifically added to the policy by endorsement. So whether you are covered for those perils depends entirely on what has been scheduled onto the particular policy. On a project in a flood zone or a seismic area, do not assume; read the policy and confirm the endorsement is there. The base builder's risk form usually leaves those major catastrophe perils out.
Do subcontractors need their own builder's risk policy?
No. Subs are not expected to carry builder's risk for their portion of the work, and buying a duplicate policy wastes money. Instead, get written confirmation that you are named or included as an insured under the project's builder's risk policy, and know who to notify if there is a loss. That matters because if a covered event destroys your installed work before handover, the project's builder's risk responds, not your general liability.
The honest bit
- Cost is generally quoted as a percentage of the total construction value and varies by project type, location, and exclusions, so it is a get-a-quote item, not a fixed number.
- Coverage for flood, earthquake, and wind depends entirely on the endorsements, so read what is actually scheduled on the policy rather than assuming.
- This is general guidance, not insurance advice. Route any state-specific requirement to Working in Your State.
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