Builder’s Risk Insurance: Essential Protection for Construction Projects

**Builder’s Risk Insurance**, also known as course of construction insurance, is a specialized property insurance policy that covers a building and materials while they are under construction. This policy protects the property owner and the general contractor from financial loss if the structure is damaged or destroyed by a covered peril before the project is completed.

What Builder’s Risk Covers

This policy covers the structure itself and the materials intended for installation, which may be on-site, in transit, or stored off-site. Covered perils generally include:

Fire and lightning
Wind and hail (damage often increases during construction)
Theft and vandalism (specifically of materials and fixtures)
Collapse

Key Exclusions to Note

**Builder’s Risk Insurance** typically excludes losses due to poor workmanship, faulty materials, or defective design, which are often covered under professional liability or errors and omissions policies. It also usually excludes earthquake and flood damage, requiring separate endorsements (Article 31 and Article 13).

Who Needs the Coverage?

This coverage is necessary for almost any project that involves new construction, renovation, or significant structural additions. The policy is usually required by the lending institution financing the project and can be purchased by the property owner, general contractor, or both. The policy typically ends when the building is finished and occupied, transitioning to a standard **commercial property insurance** (Article 33) or homeowner’s policy.

Crucial Timing: The period of construction is a high-risk time. **Builder’s Risk Insurance** provides a necessary financial safety net against unexpected setbacks that could otherwise derail the entire project budget.

Ensuring adequate **Course of Construction** coverage is fundamental to the successful financial management of any building project.