Builders risk is one of the most misunderstood policies in the construction process. Many homeowners assume it’s a comprehensive policy that covers everything during a build. It isn’t. Builders risk is property insurance only, which does not include any liability. Knowing that distinction before you break ground could save you from serious financial challenges.
What exactly does Builders Risk cover?
Builders risk — also called course of construction insurance — protects the physical structure, materials on-site, and in some cases materials in transit, from the start of construction through completion or certificate of occupancy. Common covered perils include:
- Fire, lightning, wind, and hail
- Theft of building materials and vandalism
- Explosion and sudden water damage
- Soft costs (architect fees, loan interest, permit costs) when specifically added
Policies are typically written for 3, 6, 12 or 18-month terms. Premiums in Florida are generally fully earned at inception, no refund if the project finishes early. Extensions are available if the build runs long, but must be requested before the policy expires.
What does Builders Risk NOT cover?
- Liability: No coverage for bodily injury or property damage claims against you as the property owner.
- Faulty workmanship or defective materials: Damage from poor construction practices or substandard materials is excluded.
- Worker theft: Theft by employees or workers on the job is generally not covered.
- Flood: Requires a separate policy and is not automatically included.
An alternative option: Homeowners policy with under-construction endorsement
Some homeowners skip the standalone builders risk policy and instead purchase a homeowners policy with an under-construction endorsement. This extends property coverage to the structure during construction and — most importantly — can include the liability section of the homeowners policy. That makes it a potentially stronger option for homeowners who own the lot in their name. Confirm with your agent that liability is active and review coverage limits carefully.
Listen Up: If the land is in your name, you have a liability exposure!
Most homebuilders own the lot. That means you have a personal liability exposure that exists whether you have a builders risk policy or not. Consider this:
- A delivery driver trips over construction debris on your lot.
- A retaining wall fails during a rain event and damages a neighboring property.
- Someone trespasses onto the site after hours and is injured.
In each case, a builders risk policy does nothing. You need a liability policy in place. Options include what we discussed above: a homeowners policy with an under-construction endorsement (which can include liability), a standalone vacant land or dwelling under construction liability endorsement, or confirming that a personal umbrella policy has qualifying underlying coverage. Your general contractor’s liability policy protects them — not you.
Talk to your agent before you break ground!
Whether you are the homeowner, builder, or real estate professional – make sure every phase of your project is properly covered. You could need a standalone builders risk policy, a homeowners under-construction endorsement, or guidance on closing a liability gap… either way, we can walk you through your options.
