Last Updated on October 21, 2026 by Syed Sarim Naqvi
Builders risk insurance is a temporary property policy that covers a building while it is under construction, protecting against fire, wind, theft, vandalism and weather until the structure reaches a certificate of occupancy. Premiums typically run about 1% to 4% of the total construction value, soft costs such as delay expenses need an endorsement, and coverage usually ends the moment the owner occupies the building.
Key Takeaways
- Builders risk covers the structure and materials under construction, not the contractor’s liability, tools or vehicles
- Grit Insurance and QuoteSweep both put premiums at 1% to 4% of total project value, and a six-month policy costs less than an eighteen-month one
- Coverage typically ends at the earliest of a certificate of occupancy, the owner taking possession, or policy expiry
- Soft costs, such as extra interest, taxes and re-inspection fees, are typically an optional endorsement and can make up 25% to 35% of a project’s value
- Standard policies exclude earthquake and flood unless added, and employee theft and defective workmanship are generally excluded
What Is Builders Risk Insurance?
Grit Insurance describes it as a temporary property policy for the construction phase, exposed to fire, wind, theft, vandalism and weather until the building gets its certificate of occupancy. Desjardins calls it a kind of property insurance for construction of residential, commercial, institutional, agricultural and industrial buildings, also known as course of construction cover. Distinguished explains that it is needed on any project where a failure would be a financial hit for the invested parties.
What Does It Cover and Exclude?
| Usually Covered | Usually Excluded or Limited |
|---|---|
| Fire, wind, theft and vandalism of the structure and materials | Earthquake and flood, unless endorsed |
| Materials stored on site or in transit, with endorsements | Employee theft and intentional damage |
| Temporary structures and debris removal | Manufacturing errors, pre-existing defects, delivery delays and negligence, per Desjardins |
| Soft costs, by endorsement | Vacant buildings after construction ends, which need separate cover |
The table draws on Grit Insurance, Distinguished and Desjardins. Oregon’s state risk office notes that its contracts require builders risk on an all-risks basis, including earthquake and flood, with a maximum deductible of $250,000 per loss and a 2% cap for earthquake and flood, which shows how contract terms can override standard exclusions.
How Much Does Builders Risk Cost?
Grit Insurance, QuoteSweep and eSub all report premiums of about 1% to 4% of the total construction value. Grit says policies are rated as a percentage of total insured value, so a six-month policy costs less than an eighteen-month one for the same project, and endorsements such as soft costs, transit, debris removal and pollutant cleanup add to the base premium. As an illustration only, a $1 million project at 1% to 4% would cost about $10,000 to $40,000 for the policy term.
- Project value and type: Desjardins lists the type of construction, the insured amount and the location as pricing factors
- Duration: longer builds cost more, and project delays can expire coverage
- Endorsements: soft costs, flood and earthquake add to the premium
What Are Soft Costs and Why Do They Matter?
A risk note from the Saskatchewan Health Authority explains that a project’s value includes hard costs, which typically account for 65% to 75% of the total, and soft costs, which average 25% to 35% and are harder to quantify. Oregon’s risk office says soft costs are added by endorsement and may include extra insurance premiums, with coverage varying by insurer. Acrisure notes that if soft cost cover is missing or limits are too low, extra project expenses can arise even where the physical damage is covered. The practical lesson is to size the limit to the full project, including those delay costs.
When Does Coverage End?
Grit Insurance says coverage starts when construction begins and ends at the earliest of the certificate of occupancy, the owner taking possession, or the policy expiring. QuoteSweep says the occupancy trigger is one of the most common sources of builders risk disputes, because even partial occupancy of completed floors can end or restrict cover, and partial occupancy endorsements exist for phased projects. Distinguished adds that after that point a building may need a vacant property policy. Desjardins warns that in its policy cover can end automatically if the project is put on hold for more than a month.
Who Buys It?
QuoteSweep notes that the question of who purchases the policy comes up first on any project. If the owner buys it, subcontractors do not need to price it into their bids, which can reduce project costs. Always request a certificate of insurance before work starts and check expiration dates, exclusions and the named insureds.
How Does This Connect to the Rest of Specialty Insurance?
Builders risk protects the building, while other covers protect the people and tools. See Contractor Tools and Equipment Insurance Explained, Workers’ Compensation Insurance Explained and Commercial Auto Insurance Explained. The excluded perils are in Flood Insurance Explained and Earthquake Insurance Explained, and ownership protection at purchase in Title Insurance Explained. For the guarantee side of projects, see Surety Bonds Explained.
FAQ
What is builders risk insurance?
A temporary property policy covering a building and its materials while under construction.
How much does it cost?
Typically 1% to 4% of the total construction value, depending on type, location and duration.
When does it end?
At the earliest of the certificate of occupancy, the owner taking possession, or the policy expiring.
Does it cover flood and earthquake?
Not in most standard policies, though they can be added by endorsement.
What are soft costs?
Indirect expenses after a covered loss, such as extra interest, taxes, insurance premiums and re-inspection fees.
Does it cover employee theft?
Generally not. Employee theft is excluded or limited.
Who buys builders risk?
Either the owner or the general contractor, set by the contract. Check who holds the policy before work begins.
Glossary
- Builders Risk: property cover for a building under construction.
- Course of Construction: another name for builders risk.
- Hard Costs: direct construction costs such as labor and materials.
- Soft Costs: indirect project costs such as interest, fees and taxes.
- Certificate of Occupancy: the document allowing a building to be used, ending most policies.
- Installation Floater: cover for materials being installed, often an add-on.
Sources
- Grit Insurance: Builders Risk Insurance (definition, cost range, end triggers, endorsements)
- QuoteSweep: Builders Risk Insurance, Agent’s Guide (pricing, occupancy disputes, who buys)
- Oregon DAS Risk: Insurance Clauses, Builders Risk (all-risks contract clause, soft costs, installation floater)
- Saskatchewan Health Authority: Risk Note, Construction Insurance (hard and soft cost shares)
- Desjardins: Builder’s Risk Insurance (exclusions, pricing factors, project-on-hold rule)
- eSub: Explaining Builder’s Risk Insurance Cost and Coverage (cost range, theft exclusions)
- Distinguished: Builder’s Risk Insurance (soft costs, vacant property cover)
- Acrisure: What Is Builder’s Risk Insurance? (soft cost gaps, valuation)
Related reading: Business Owner’s Policy (BOP) Explained · Product Liability Insurance Explained · Commercial Crime Insurance Explained
Published October 2026. Prices, end triggers and exclusions vary by insurer, project and contract and change often; always read the occupancy and soft-cost wording, and refresh this article periodically.
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