A homeowner or landlord policy is designed for a completed, occupied or readily-occupiable structure. During active construction, that policy may not respond at claim time because the property is under "course of construction" exposure.
Builders risk fills the gap. It covers the structure during the construction period, the materials on site, and certain "soft costs" if a covered loss delays the project. When the project is complete and ready for occupancy, builders risk ends and a permanent policy takes over.
Builders risk vs homeowner during construction
The core difference: builders risk underwrites the project, not the structure as it sits. The carrier expects framing exposure, materials on site, contractor activity, and a property that is not yet inspected for occupancy.
A typical homeowner policy will deny a claim if the carrier discovers the property was under significant construction at the time of loss. The policy was written for an existing structure, and the construction changes the risk profile in ways the carrier did not price for.
Soft costs coverage
"Soft costs" are non-construction expenses you incur when a covered loss delays the project. They typically include:
- Architect and engineering fees for revised plans.
- Permit and inspection fees.
- Additional financing and interest costs.
- Real estate taxes during the extended construction period.
- Legal and accounting fees tied to the delay.
Standard builders risk often includes a small soft cost limit. For larger or longer projects, increasing the limit is usually worth the small extra premium.
What happens if the project is delayed
Two scenarios:
Scenario 1: Delay caused by a covered loss. The project takes longer because of a fire, water damage, theft of materials, or other covered event. Builders risk pays soft costs and (with the right endorsement) extended business income for the delay period.
Scenario 2: Delay caused by something else. The project takes longer because of contractor scheduling, supply chain, permitting, or weather (without a specific covered loss). Standard builders risk does not pay for these delays. Some forms offer "delay in opening" or "delay in completion" coverage as a separate endorsement.
Either way, plan for the project to take longer than the policy term. Most builders risk policies are written for 6, 9, or 12 months. If the project runs long, we extend the policy. Plan for this at the start so you don't get caught with an expiring policy and an unfinished project.
Existing structure coverage for renovations
For renovations to an existing building (as opposed to ground-up new construction), there is an extra coverage question: who covers the existing structure during the renovation?
Two common approaches:
- Builders risk includes the existing structure. Some forms can be written to cover the entire building, both the existing structure and the new work. Often the cleanest approach for major renovations.
- Builders risk on the new work only, with a vacant property form on the existing structure. Used when the existing building has separate value or when the renovation is limited in scope.
Talk to us before construction starts so we can structure the right combination.
When builders risk ends and landlord (or commercial) policy begins
Builders risk is a temporary policy. It ends when one of:
- The project is complete and ready for occupancy.
- The certificate of occupancy is issued.
- The property is sold to a new owner.
- The policy term ends (with no extension).
At that transition point, you need a permanent policy in place before the builders risk ends. We coordinate the transition so there is no coverage gap.
For an investor, the permanent policy is typically:
- A DP-3 landlord policy for 1-4 unit residential rentals (see rentals page).
- A commercial package for 5+ unit multifamily or commercial property (see multifamily and commercial).
- An STR policy if the property will be operated as a short-term rental (see STR page).
- A homeowner policy if the property will be your primary residence.
What we need to quote builders risk
- Property address and project description (new build, renovation, addition).
- Total construction value (sum of materials and labor).
- Expected start and completion dates.
- Builder or general contractor information.
- Whether you or the GC carry general liability and workers comp.
- Any soft cost concerns (lender requirements, sale date, lease commitments at completion).
Send the details to us by phone, text, or email and we will structure builders risk plus the transition to permanent coverage.