Who pays for builders risk insurance depends on the construction contract. Under AIA A201, the most widely used owner-contractor agreement in the U.S., the owner buys the policy. Under ConsensusDocs 200 and many custom contracts, the obligation may shift to the general contractor. Always check Article 11 of the AIA, Article 10 of ConsensusDocs, or the equivalent insurance section in a custom contract.
For the broader explainer on what the coverage is and how it works, see our complete builders risk insurance guide. The rest of this page covers contract-by-contract responsibility, when each party usually pays, and how to resolve the disputes we see most often.
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AIA contracts and builders risk responsibility
The American Institute of Architects (AIA) publishes the most widely used owner-contractor agreements in U.S. construction. Across the AIA contract family, the default holds steady: the owner buys property insurance, including builders risk, on the work in progress.
Under AIA A201-2017 §11.3, the owner has to buy and maintain a builders risk policy on an “all-risk” or equivalent form. The limit covers the full insurable value of the project, including later contract changes. The 2017 edition moves the specific limits and requirements into the Insurance and Bonds Exhibit attached to the A101 (or similar prime agreement). The default party stays the same: the owner.
“Owner” in an AIA contract means the party signing the prime agreement. On a private commercial job, that’s typically the developer or end-user. On a public job, it’s the public entity. The owner is the named insured. The contractor and named subcontractors sit as additional insureds.
When the owner delays buying the policy, AIA A201 §11.3.2 lets the contractor step in. The contractor buys the coverage and bills the owner back as a change order. This protects the contractor from job-site loss exposure mid-project. We see it play out a few times a year on residential remodels where the homeowner thought their HO policy handled the renovation, and the project actually needed a separate builders risk policy.
The AIA default flips often. Many owners modify Article 11 in the supplementary conditions and shift the obligation to the contractor. Developer-built ground-up projects are the most common place we see this flip; the developer wants the GC carrying the property risk through to substantial completion. When the contract is modified, the modified language controls. Read the supplementary conditions before signing.
ConsensusDocs and other contract families
The AIA isn’t the only game in town. ConsensusDocs is published jointly by 40+ construction industry organizations, including the AGC. ConsensusDocs 200 takes the opposite default: Article 10 places property insurance, including builders risk, on the constructor unless the parties agree otherwise.
EJCDC (Engineers Joint Contract Documents Committee) is common on heavy civil and engineering work. EJCDC C-700 leaves builders risk to the project-specific supplementary conditions. IRMI’s analysis of insurance allocation in construction contracts is a useful outside reference for the contract-by-contract differences.
Custom contracts vary wildly. Production homebuilder contracts, design-build agreements, and developer-drafted contracts often place the obligation on the contractor by default. Subcontractor agreements treat the sub as an additional insured on the master policy held by the owner or GC.
The split between residential and commercial matters too. On most commercial projects, the owner buys the policy. On smaller residential and renovation work, the GC bundles builders risk into the bid and handles it directly.
When the contractor pays for builders risk
Several common scenarios put the policy on the GC’s books.
Design-build is the clearest case. When a single firm handles design and construction, the contractor takes on the property insurance for the full job. The owner is paying for a turnkey result and expects the contractor to carry the risk while the building is going up.
On smaller residential remodels and additions, the GC usually buys the policy. On jobs under $250,000, most homeowners assume their HO policy covers the work, and most HO forms restrict or exclude coverage during construction. The GC who knows the gap exists buys a short-term builders risk policy and bakes the cost into the bid. BuildersRiskNerd quotes dozens of these every month for remodelers running 3 to 9 month projects.
Spec home builders insure their own inventory. A spec builder owns the property they’re building and any finished homes waiting to sell. They buy builders risk on units in progress and a vacant dwelling policy on completed-but-unsold homes. The named insured is the builder, because the builder is the owner.
Production homebuilders running multiple lots use a master policy. Volume builders carry a master builders risk policy that covers all units in progress under one premium. The carrier adds and drops lots as construction starts and ends.
In each of these cases, the GC sits as named insured. The bank goes on as mortgagee. The buyer of the finished home stays off the policy. The builder owns the property until closing.
When the owner pays for builders risk
The owner buys builders risk on most other types of work.
On most commercial construction, from offices and retail to industrial sites and hotels, the owner is named insured. The GC and named subs are additional insureds. The mortgagee gets added when there’s construction financing.
Owner-developer projects work the same way. Real estate developers holding the property through construction handle insurance directly because they hold the financial risk on the building.
Custom homes built for an end-user follow the owner-pays default. The homeowner who hired the builder is the named insured. The builder gets added as additional insured. BuildersRiskNerd places a lot of these for clients building primary residences and second homes, and we walk both parties through the homeowner-named coverage setup.
Major renovations where the homeowner stays involved usually run the same way. Even when the GC manages the project, the homeowner is often the named insured because the policy needs to match up with their existing homeowners coverage when construction wraps.
There’s a coverage reason owner-paid builders risk is usually the better setup. The owner has the largest insurable interest in the building, especially as the project progresses and installed materials exceed what the contractor has at risk. Owners who keep the policy in their own name stay protected at every stage of the build. Owners who push the policy to the contractor often discover gaps at substantial completion or partial occupancy, when the protection depends on how the policy was endorsed.
When the lender requires builders risk
Construction lenders focus on whether someone bought the policy and whether the certificate names the lender correctly. Who pays for it is between the owner and the contractor.
A construction loan agreement requires builders risk as a closing condition. Before the bank funds the first draw, the borrower hands over a certificate of insurance showing the property, the limits, and the lender’s name in a specific format.
The lender goes on through a mortgagee endorsement, sometimes called the loss payable clause. The endorsement gives the bank notice of cancellation, separate notice of loss, and the right to receive loss payments directly above a threshold.
ISAOA ATIMA is the language to know. It stands for “Its Successors and Assigns As Their Interests May Appear.” The full mortgagee designation usually reads “Bank Name, ISAOA ATIMA.” This wording covers any future loan participants, syndication members, or assignees, so the endorsement holds even when the loan paper changes hands. If a lender’s COI requirements include “ISAOA ATIMA” and your certificate omits it, the lender will reject the certificate at closing. We catch this on roughly one of every four lender requests we review.
Here’s the mortgagee block format most lenders accept on the first try:
Bank Name, ISAOA ATIMA Loan Number: [if applicable] Bank Street Address City, State ZIP
Drop that into the COI’s mortgagee field, swap in the loan details from the construction loan agreement, and most lenders sign off without a second pass.
Loss payable matters at claim time. If the building burns, the carrier issues the check to the named insured and the mortgagee jointly, and the bank’s signature is required to release funds for repair. The named insured controls the rebuild process when the loss check comes back.
Common conflicts and how to resolve them
The most common dispute we see is the unread contract. We get two or three of these every quarter, usually on residential jobs in the $250K to $1M range where the contract mentions “builders risk” once without naming the responsible party. The owner assumed the contractor was buying it. The contractor assumed the owner was buying it. Both sides are mid-project, scrambling to bind a policy. If a fire or theft hits before the gap closes, the loss falls on whoever the contract says was responsible.
Read the contract before signing. On AIA contracts, that’s Article 11 in A201 plus the Insurance and Bonds Exhibit. On ConsensusDocs 200, it’s Article 10. On a custom contract, search for “builders risk,” “property insurance,” or “course of construction.” When the contract is silent or ambiguous, get it amended before work starts.
The second confusion involves subcontractors. Subs sometimes ask whether they need their own builders risk policy. They rarely do. The standard arrangement lists subs as additional insureds on the master policy. The sub’s tools, equipment, and materials in transit are covered by their inland marine policy, separate from the master builders risk. Our builders risk vs. general liability breakdown walks through which insurance covers which loss when contractors get the two confused.
The third conflict is the homeowner who thinks their HO policy handles the renovation. Most HO forms exclude buildings under construction past a dollar threshold, often $50,000 to $75,000 of work, depending on the carrier. Once the project crosses that threshold, the renovation falls outside the HO policy. The fix is a separate builders risk policy. Most homeowners learn this at claim time.
Get a builders risk quote in either name
BuildersRiskNerd shops builders risk in either party’s name. Tell us who is signing the policy (owner, contractor, homeowner, developer), the project address, the construction values and term, and any lender or additional insured requirements. We come back with quotes from admitted and non-admitted carriers that match the project profile. For a closer look at what the policy covers and excludes, see our coverage explainer.
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Frequently asked questions
Who pays for builders risk on an AIA contract?
Under AIA A201-2017 §11.3, the owner buys builders risk insurance unless the contract is modified. The 2017 edition moves specific insurance limits to the Insurance and Bonds Exhibit attached to A101, and the default party stays the owner. Many AIA contracts get amended in the supplementary conditions to shift the obligation to the contractor; always read the supplementary conditions before assuming the default applies.
Does the contractor or owner pay for builders risk?
It depends on the contract. AIA contracts default to the owner. ConsensusDocs 200 defaults to the constructor. Most commercial work is owner-paid. Smaller residential remodels and design-build projects are usually contractor-paid. Spec homes and production homebuilder inventory are contractor-paid because the contractor owns the property. Check Article 11 (AIA), Article 10 (ConsensusDocs), or the equivalent insurance section in a custom contract before assuming.
Do subcontractors need builders risk?
Subcontractors rarely need their own builders risk policy. Subs are listed as additional insureds on the master builders risk policy held by the owner or general contractor. Their tools, equipment, and materials in transit are covered by their inland marine or contractor’s equipment policy, separate from the master builders risk. If a contract specifically requires a sub to carry their own builders risk, that’s unusual and worth pushing back on.
Is builders risk required by lenders?
Yes, on almost every construction loan. Lenders require builders risk as a closing condition before funding the first draw. The certificate of insurance has to show the lender as mortgagee with the correct ISAOA ATIMA language. Some lenders also require minimum carrier ratings (commonly A.M. Best A- or better) and minimum policy terms. Check the loan agreement’s insurance schedule before binding.
BuildersRiskNerd is a brand of ContractorNerd Insurance Services, LLC, a licensed insurance producer (CA License #6015566). All insurance products and services are offered through ContractorNerd Insurance Services, LLC. We’re a broker, not an insurer. Policies are underwritten by admitted and non-admitted carriers.