What does builders risk insurance cover?

Builders risk (also called course-of-construction) insurance covers the structure and materials during active construction. It typically covers damage from fire, wind, hail, lightning, theft of materials, and vandalism. Coverage ends when the project reaches completion or the policy expires. Standard homeowner policies generally do not cover homes under active construction.

How much does builders risk insurance cost?

Builders risk premiums typically range from 1% to 4% of total project value annually, depending on coverage tier, project type, and location. A $400,000 residential new build might cost $1,500 to $3,000 for a 9-month project under broad coverage. Comprehensive (open-perils) coverage runs higher. Coastal and high-risk states can push rates above this range.

Who needs builders risk insurance?

Anyone building a new home, completing a major addition, or undertaking significant renovation typically needs builders risk coverage. Lenders financing new construction almost always require it. General contractors may carry their own policy, or the property owner may be required to obtain it. Check your construction contract and lender requirements.

Builders Risk Insurance Calculator

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Builders Risk Insurance Field Guide

What this estimate covers

Builders risk insurance (also called course-of-construction coverage) protects a structure and the materials in it from the moment construction starts until the project is substantially complete. Once complete, a standard homeowners or commercial property policy takes over. The gap between those two policies is exactly what builders risk fills.

Standard homeowner policies typically do not cover homes under construction. Without builders risk, a fire, windstorm, or theft of materials during the build leaves the property owner or contractor holding the loss out of pocket. Lenders financing new construction almost always require proof of builders risk coverage before releasing construction draws.

How the premium is calculated

Builders risk premiums are typically expressed as a percentage of the total completed project value, applied over the construction period. Insurers call this the "rate on value." A 0.45% annual rate on a $400,000 project works out to $1,800 per year, or about $1,350 for a 9-month project. The daily cost at that level is under $5.

Three factors move the rate most: coverage tier (named-perils vs. open-perils), project location (weather risk, local loss experience), and project type (commercial projects carry more underwriting risk than residential). Longer projects sometimes see a modest per-unit discount because the insurer's total exposure is spread differently across time.

Coverage tiers explained

Basic (named-perils): Covers only the causes of loss specifically listed in the policy. Common named perils include fire, lightning, explosion, windstorm, hail, theft, and vandalism. If the cause of damage is not on the list, the claim is denied. Basic is the lowest-cost tier and may be appropriate for shorter, lower-risk projects.

Broad: Adds additional causes of loss beyond the basic list, often including water damage from rain entering through an open structure, weight of ice or snow, and collapse. Broad is the most common choice for residential new construction and is what most lenders accept without question.

Comprehensive (open-perils): Covers all causes of loss not specifically excluded by the policy. Exclusions typically include flood, earthquake, normal wear, and war. Comprehensive is the most protective tier and is commonly required on larger commercial projects or those with complex scope.

What builders risk does not cover

Flood and earthquake are almost universally excluded and require separate policies. Contractor tools and equipment are typically not covered by a builders risk policy -- a separate inland marine or equipment floater policy handles those. Liability for injury on the job site is separate as well, usually through a general liability or umbrella policy. Professional liability (design errors) is another separate line entirely.

Review the policy exclusions carefully with your agent before binding coverage. The gap most often caught at claim time is assuming flood or site-preparation damage was covered when it was not.

Comparing quotes

Use the cost-per-$1,000 output from this calculator as your baseline when comparing quotes. A quote at $6.00 per $1,000 of project value for broad coverage on a $400,000 project comes to $2,400. A quote at $9.00 per $1,000 on the same project is toward the high end and worth shopping further. The daily cost equivalent is a useful gut-check: at around $7/day for 9 months of coverage on a $400,000 build, the protection is modest relative to the total exposure.

Insurance rules and coverage requirements vary by state. Check with a licensed agent in your state before purchasing coverage.

Methodology

This calculator estimates builders risk premiums using a rate-on-value model: annual rate multiplied by project value, scaled to project duration. Rate bands by tier are drawn from industry sources (Insurance Information Institute, IRMI Construction Insurance Handbook). State modifiers reflect relative weather and loss frequency. Property-type modifiers reflect typical underwriting adjustments. Duration factor applies a modest discount for projects over 12 months, consistent with common market practice.

This is an estimator for budgeting and comparison purposes. Actual premiums depend on the specific insurer, underwriting criteria, deductible selection, site-specific risk factors, and the policy form.

Read the full methodology including formula notation and source references.