Builders risk pays for damage to a building while it’s being built. Fire, theft, vandalism, wind, hail, and other named perils, until the project is done and someone moves in.
The formal version: builders risk insurance covers physical loss or damage to a structure under construction from fire, theft, vandalism, weather, and other named perils until the project is complete and the structure is occupied.
What actually pays at claim time depends on three things: the form, the endorsements, and the deductible math. Most denied claims we see fall into one of those three.
Quick reference: What’s covered vs. what’s not
Most policies follow the ISO Special Form (CP 00 20) or a carrier’s version of it. The covered perils stay fairly consistent. The differences show up in endorsements, deductibles, and exclusions specific to each carrier.
| Covered under a standard policy | Not covered (without endorsement) |
| Fire and lightning | Faulty workmanship or design errors |
| Theft of materials on site | Employee theft (handled by crime policy) |
| Vandalism | Mechanical breakdown |
| Wind and hail | Mold and fungus |
| Falling objects | Earth movement (earthquake, sinkhole) |
| Water damage from accidental discharge | Flood and surface water |
| Explosion | War, terrorism, nuclear |
| Materials in transit (with installation floater) | Normal wear and contractor’s tools |
| Materials in temporary off-site storage | Loss after occupancy or substantial completion |
If your project carries any right-column risk, you’ll need an endorsement or a separate policy. We cover those below.
Standard covered perils
Most US builders risk policies use ISO’s CP 00 20 form or a carrier’s proprietary version. The named perils list is similar across both. The way each carrier handles theft, water damage, and named storms is not. Two policies on the same project can pay differently on the same loss. Read the form before you bind.
Fire and lightning. A roof framer’s halogen work light tips into a stack of insulation. The structure burns. Builders risk pays for lost work, materials on site, and rebuild within the policy limit. Fire is the largest builders risk loss category by paid claim dollars.
Theft. Copper wire, HVAC condensers, lumber, and delivered windows are the big targets. Most policies cover theft of materials whether installed, in temporary storage on site, or stacked outside. A common claim pattern: a contractor signs for a $12,000 window delivery on a Friday afternoon. Monday morning, the windows are gone. Builders risk pays. Some carriers require personal property like tools to be inside a locked structure for theft coverage to apply.
Vandalism. Spray paint on framing, smashed windows, kicked-in drywall. Some policies sub-limit vandalism in high-loss areas or on unfenced sites.
Wind and hail. Wind that lifts off plywood sheathing, hail that dents a new metal roof. Most policies pay direct wind and hail damage. Coastal projects often carry a separate, much higher named storm deductible (typically 2-5% of the limit, not a flat dollar amount).
Falling objects. A crane drops a beam. A tree falls during a storm. Covered as a named peril.
Water damage from accidental discharge. A plumber leaves a fitting loose, the line charges overnight, and the new hardwood floor is ruined. Covered. Note the word “accidental.” This is not flood coverage.
Explosion. Most often a propane heater used during winter framing. Covered.
Damage during transit. With an installation floater (built into the base form on some carriers, added by endorsement on others), materials damaged on the way to the site are covered. This matters for custom millwork, prefab components, and any big delivery. Damage at the freight yard counts.
Materials in temporary off-site storage. Most policies extend coverage to materials sitting in a leased warehouse or storage yard. Coverage is usually capped at 25% of the project limit and limited to a defined number of days.
Common exclusions and why they exist
Insurance carriers pay for accidents. Risks the contractor controls go elsewhere. Builders risk follows that logic. Faulty workmanship is the gap most contractors learn about at claim time, not before.
Faulty workmanship. This is the exclusion that surprises contractors most. If a framer cuts a beam wrong and the wall fails, builders risk doesn’t pay to redo the framing. Builders risk insures the building, not the labor that built it. That gap goes to GL. Design errors go to professional liability or E&O. We break down the line on our side-by-side with general liability page.
The faulty workmanship exclusion has tiers. The base form (LEG 1) excludes the cost of fixing the bad work and any damage that flows from it. A LEG 2 endorsement covers the resulting damage but not the bad work itself. A LEG 3 endorsement (the broadest) covers both. Most ground-up residential projects we shop start with LEG 1. The custom builders and commercial GCs we work with usually add LEG 2 or LEG 3.
Employee theft. If your crew walks off with materials, that’s a crime policy claim, not builders risk. Builders risk covers theft by outside parties only.
Mechanical breakdown. A new HVAC unit that fries itself on first startup is a manufacturer’s warranty issue, not a builders risk loss.
Mold and fungus. Most policies exclude mold unless it results directly from a covered peril (a pipe bursts, then mold grows). Standalone mold from humidity or poor ventilation is excluded. A mold endorsement is available on most policies for an extra premium.
Earth movement. Earthquakes, sinkholes, mudslides. Excluded by default. California and Pacific Northwest projects often add an earthquake endorsement or a standalone DIC (difference in conditions) policy.
Flood. Surface water from rain, rising rivers, storm surge. Excluded. NFIP or private flood is the fix.
War, terrorism, nuclear. Standard property exclusions. Terrorism coverage is available under TRIA on commercial projects.
Normal wear, contractor’s tools and equipment. Tools belong on a contractor’s tools and equipment policy or inland marine, not builders risk. Most carriers will sub-limit some small tool coverage but won’t make it primary.
Loss after occupancy or substantial completion. Once the certificate of occupancy is issued, the project sells, or substantial completion is reached, builders risk drops off. Anything that happens after that belongs on the homeowner’s policy or commercial property policy. This is the trigger that catches DIY owner-builders the most often.
Endorsements that expand coverage
Most builders risk losses that don’t pay aren’t deductible problems. They’re exclusion problems. The right endorsements close those gaps before you bind, not after the loss. We have a deeper write-up on each on our endorsements that broaden coverage page. Here’s the short version.
LEG 3 (defects clause). Covers the cost to repair faulty work and the resulting damage. Big deal for custom builders and contractors with thin margins on rework.
Soft costs. Pays the financing costs, lost rent, extended permits, and architect re-fees that pile up if a covered loss delays the project. Soft costs is the endorsement we see contractors skip most often to trim premium. It’s also the one that pays the biggest checks when a project gets delayed. Read more on soft costs coverage breakdown.
Delay in opening. Income protection for commercial projects. Pays anticipated rent or sales revenue lost during a delay caused by a covered loss.
Hot work. Cutting, welding, soldering, roofing torches. Some carriers exclude hot work losses unless the hot work endorsement is added or a written hot work permit system is in place. If you’re putting on a torch-down roof, ask.
Theft of materials off site. Extends theft coverage to a leased lockup, a contractor yard, or a job trailer parked elsewhere overnight.
Ordinance or law. Pays for the upgraded code requirements that get triggered after a covered loss. Critical on renovations and additions, where the existing structure may be brought up to current code as a condition of repair. See ordinance or law coverage.
Earthquake and flood. Available as endorsements in some states, separate policies in others. Carriers get pickier fast in CA and along the Gulf Coast.
BuildersRiskNerd quotes with the endorsements that fit your project, not a stripped-down policy you’ll regret later. Start a quote and we’ll flag what we’d add.
Coverage triggers and limits
Builders risk has specific rules about when coverage starts, when it ends, and how it pays. Misreading any of these is a common reason claims get denied.
When coverage starts. Most carriers bind on the policy effective date or the day materials first hit the site, whichever is later. A handful will backdate if the project is already underway. Most will not, especially once foundation work has begun. Lock in coverage before you break ground. Every week you wait makes placement harder and premium higher.
When coverage ends. Whichever of the following comes first: the certificate of occupancy is issued, the structure is sold, the building is occupied for its intended use, the policy expires, or the project reaches substantial completion (typically 90% or higher). That last one trips people up. If you’ve been moving in furniture and using the space, even without a final CO, the carrier may argue coverage already ended.
Replacement cost vs. actual cash value (ACV). Most builders risk policies pay replacement cost on the structure, which means the full cost to rebuild without depreciation. Materials and personal property often pay ACV instead, unless the policy spells out replacement cost. Check the declarations page. On a $500,000 loss, the difference can run six figures.
How policy limits work. Your limit should equal the completed value of the project, not the construction loan amount. If the limit is set to the loan and you have a $400,000 loss against a $700,000 finished value, the carrier may invoke a coinsurance penalty and pay only a fraction of the loss. We size limits to the construction budget plus soft costs, not the financing.
How the deductible applies. Per occurrence, not annual. A typical residential builders risk deductible runs $1,000-$5,000. Wind and hail in coastal markets can run 2-5% of the limit. Theft and vandalism deductibles often sit higher than fire on the same policy. We flag the named storm deductible on every coastal quote so it doesn’t show up as a surprise at claim time.
How all of this drives premium is broken down on our builders risk premium drivers page, and we cover who pays the policy for the policy on different project types.
Real claim scenarios
Coverage decisions get made on the specifics. Three claims we’ve worked, with what paid and what didn’t.
Scenario 1: Fire mid-build, $480,000 loss, GC’s policy. A custom home in framing-and-rough-in caught fire from a temporary heater. The structure was a total loss. The builders risk policy paid the full structure limit ($550,000 with replacement cost), plus $35,000 in debris removal under the policy’s debris removal extension. What didn’t pay: the GC’s generator and tools on site, since those belong on a tools and equipment policy. Soft costs (extended permit fees, architect time, additional financing) were also denied because the policy didn’t include the soft costs endorsement. Estimated uncovered loss: $42,000.
Scenario 2: Copper theft on a multi-family job, $28,000 loss. A four-unit apartment build had its rough copper plumbing pulled out of the walls overnight after the framing inspection. The builders risk policy covered the cost of replacing the copper and the labor to reinstall, less the $5,000 deductible. What the carrier paid: $23,000. What it didn’t: the two-week schedule slip and the lost rent the developer had projected. The developer didn’t carry a delay in opening endorsement. Lesson: theft is covered, but the downstream financial losses usually aren’t unless you’ve added the right endorsement.
Scenario 3: Windstorm topples exterior framing, $120,000 loss. A two-story addition in central Florida lost its second-floor exterior walls during a tropical storm. The framing was up but unsheathed. The builders risk policy covered the loss, but the named storm deductible ran 5% of the limit ($25,000 against a $500,000 limit), much higher than the standard $2,500 the contractor remembered from the quote. The contractor walked away with a $95,000 check on a $120,000 loss. Lesson: in coastal and hurricane-zone states, the named storm deductible is the number that matters, not the base deductible.
The pattern across all three: builders risk does what it says. It doesn’t fill gaps that belong on other policies. And the endorsements you skip are the ones you wish you’d added at claim time. The contractors who quote with us catch this earlier rather than later.
Get a quote with the right coverage
Start a quote with BuildersRiskNerd and we’ll come back with options from carriers that match your project, your trade, and your state. Most quote requests get options back in 24-48 hours. Submit once, get options. We’ll flag the endorsements we’d add for your build before you bind, and walk through any deductible or limit questions over the phone.
Still deciding between builders risk and GL? Our builders risk vs general liability breakdown lays out the line.
Frequently asked questions
Does builders risk insurance cover theft? Yes. Standard builders risk policies cover theft of materials on the construction site by outside parties. Employee theft is excluded and falls under a crime policy. Some carriers require materials to be inside a locked structure for full theft coverage on personal property; check the locked-structure clause on the declarations page.
Does builders risk cover the contractor’s tools and equipment? No, not as primary coverage. Tools and equipment belong on a contractor’s tools and equipment policy or an inland marine policy. Some builders risk policies include a small sub-limit (typically $5,000-$10,000) for incidental tool coverage on site, but it’s not designed to be the primary tools coverage.
Does builders risk cover materials in transit? Yes, with the right policy structure. Most builders risk policies cover materials in transit if an installation floater is included in the base form or added by endorsement. Coverage usually applies from the time materials leave the supplier until they reach the job site or temporary storage. Confirm the limit and any per-conveyance cap.
Does builders risk cover the foundation only, before vertical construction starts? Yes, once the policy is bound and materials are on site. Builders risk covers the foundation as part of the structure under construction. Coverage starts on the policy effective date or first material delivery, whichever is later. Most carriers will not bind a policy after foundation work has already begun, so getting coverage in place before you break ground matters.
Does builders risk cover vacant land before construction starts? No. Builders risk is a course of construction policy. It covers a structure under construction, not the land itself. Before construction begins, vacant land is typically covered (if at all) by a vacant land liability policy or a personal liability extension on the owner’s existing policy. Builders risk binds when there is a project to insure.
References: ISO/Verisk Special Form CP 00 20, IRMI builders risk glossary, Insurance Information Institute (III) commercial property coverage guide, NAIC consumer property insurance alerts.
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. Coverage details on this page are educational and reflect typical policy structures; actual coverage terms vary by carrier and policy form.