Builder's Risk Insurance

A custom home builder in Newport Beach had a project 70 percent complete when a Santa Ana wind event blew through. Wind ripped off the temporary roof protection. Rain flooded the interior. Drywall, flooring, cabinets, electrical rough-in all destroyed. The damage exceeded $280,000. Builder's risk insurance covered the loss, paid for demolition of damaged materials, and funded the rebuild. The homeowner never saw a delay in their closing date.

Builder's risk insurance, sometimes called course of construction coverage, protects buildings while they're being built. It covers the structure itself, materials stored on site, materials in transit to the site, and equipment being permanently installed. Standard property insurance doesn't apply until a building is complete and occupied. Builder's risk fills that gap.

The party responsible for purchasing builder's risk depends on the construction contract. On custom homes, the builder typically provides it and includes the cost in the contract price. On commercial projects, the owner often purchases it and requires the GC to be a named insured. The contract language matters. Whoever purchases it must ensure adequate limits and proper insured parties.

Coverage runs from when materials first arrive on site until the project completes, the building receives a certificate of occupancy, or permanent property insurance takes effect. Whichever happens first. Project delays can require coverage extensions. Material cost increases during the project can require limit increases. Managing builder's risk actively during construction prevents coverage gaps.