Builder’s risk insurance: A complete guide

If you’ve ever managed a construction project, you know that even the best plans can often go awry. A storm rolls in at the wrong time, or your new materials arrive at the job site damaged. Whether you’re tackling home renovations or you’re a real estate investor improving a property, setbacks like this can be expensive.

Builder’s risk insurance helps protect you when those surprises happen. This insurance may be optional, but in some cases it is required by a lender, contractor, or local officials.

This guide explains how builder’s risk insurance works, what it covers and doesn’t, and how to get a policy.

What is builder’s risk insurance?

Builder's risk insurance, also called home builder's insurance, contractor's all-risk insurance, or course-of-construction insurance, is designed to protect a property and its materials while they're being built or remodeled. If a storm damages the site, someone steals equipment, or vandalism slows progress, this coverage can help absorb the financial impact.

Policies are available for residential, commercial, and mixed-use projects, and the terms vary widely by insurer and project size. If you're preparing for a renovation or addition, you should explore our guides on renovation and remodeling, or on buying a new construction home.

Types of builder’s risk insurance

There are four main types of builder’s risk insurance, though others might be available under certain circumstances. Each is designed for different project needs:

1. Single project policy: Often called a one-shot or location-specific policy, this is the most common option for property owners completing one construction or renovation project at a time.
2. Reporting form policy: Designed for contractors or homeowners managing multiple projects at once. The policy adjusts as projects begin or finish.
3. Blanket deposit policy: Used by contractors handling many projects each year. Individual project reporting isn’t required, since all projects fall under a single umbrella.
4. Blanket installation policy: Reserved for trade contractors completing extensive or high-value installation work across multiple sites.

What does builder’s risk insurance cover?

Every construction project carries uncertainty, and builder’s risk insurance is designed to soften the impact when something unexpected happens. Coverage varies by insurer. Most policies protect both hard costs, like the materials and labor needed to build, and soft costs like expenses that can grow when a project is delayed. This includes items such as additional loan interest or extended real estate taxes.

At its core, this insurance offers property damage protection for a wide range of insured hazards. Depending on your policy, coverage may include:

• Damage from events like vandalism, fire, lightning, hail, wind, smoke, theft, explosions, vehicle collisions, and major natural disasters such as hurricanes or earthquakes
• The structure itself, plus construction materials, items damaged in transit, project documents like blueprints, and temporary structures such as scaffolding, fencing, signage, and retaining walls
• Financial losses are tied to delays, including reduced rental income, extended property taxes, lost sales income, or higher interest charges on construction loans.
• Coverage for many types of work, from new construction to home renovations, additions, and installations across residential and commercial properties

Coverage add-ons

Every construction project carries its own risks, and sometimes a standard builder’s risk insurance policy doesn’t provide enough protection. Coverage add-ons, also called endorsements, can expand your policy to better protect you against unexpected events that might disrupt progress or increase costs.

• Flood or earthquake coverage
• Extended storm protection
• Coverage for construction forms and temporary structures
• Expedited expense reimbursement
• Extra debris removal
• Costs to repair or replace tools, machinery, or other construction equipment
• Pollutant cleanup
• Sewer or drain backup
• Coverage for damaged or lost project documents
• Ordinance or law upgrades
• Testing of building systems

What does builder’s risk insurance not cover?

Exclusions vary, so it’s important to read policy details. Common gaps include:

• Damage to land, landscaping, or pavement
• Workers’ compensation claims
• Accidents, which fall under construction liability insurance
• Normal wear and tear
• War or terrorism
• Floods and earthquakes (unless added)
• Employee theft
• Rust, mold, or corrosion
• Mechanical or equipment breakdowns
• Faulty design, workmanship, or materials
• Intentional damage
• Liability protection for non-employees who are injured while visiting the job site

Who needs a builder’s risk insurance policy?

Anyone with a financial stake in the construction project may need coverage, including:

• Property owners
• Home buyers building new construction
• Real estate investors
• General contractors
• Subcontractors
• Lenders
• Architects or engineers

Some municipalities won’t issue permits without proof of coverage.

Most often, the property owner, buyer, or general contractor purchases the policy based on the terms of the real estate purchase agreement. Other key players may be added as insured parties.

Do you need one if you have homeowners insurance?

Homeowners insurance and builder’s risk insurance may sound similar, but they’re designed for different moments in a property’s life cycle. Homeowners insurance protects a finished home – your belongings, your liability, and the structure once it’s complete and occupied.

Builder's risk insurance steps in earlier. It covers a property while it's under construction, helping protect against insured hazards such as theft, vandalism, fire, storm damage, and other events that could derail the build. Most homeowners policies won't cover these risks during renovations or new construction, especially if the project is extensive or the home is temporarily uninhabitable.

Some lenders, contractors, and local building departments require builder’s risk coverage before work can begin. Even when it isn’t needed, it can provide meaningful property damage protection and liability protection during the most vulnerable phase of a project.

Homeowners insurance becomes essential again once the work is complete.

Together, these two policies help create a safety net, one for the build itself and one for the home you’ll enjoy afterward.

How much does builder’s risk insurance cost?

Understanding the cost of builder’s insurance can help you budget more accurately. Most policies cost 1% to 5% of the total construction budget. For a $200,000 project, builder's risk insurance premiums typically range from $2,000 to $10,000.

Several factors influence price:

• Total project cost
• Location and local risk levels
• Project timeline
• Square footage
• Contractor and subcontractor experience
• Coverage limits and payout type
• Quality and sourcing of materials
• Storage logistics for materials
• Add-ons or endorsements

If you’re planning to build your home, you could save money by implementing a few inexpensive ways to lower your overall construction budget.

How to get home builder’s insurance coverage

Builder's risk insurance doesn't have to feel overwhelming. When renovating your home or undertaking a real estate investment project, taking it step by step helps you choose coverage that protects your build from insured hazards and unexpected setbacks.

1. Determine the project scope: Outline what you’re building or renovating, since a small addition and a ground-up build carry different risks. A clear scope helps insurers match your property damage protection to the work ahead. If you’re still budgeting, review what goes into the cost to build a house.
2. Review your coverage needs: Consider what could reasonably go wrong - damage, theft, delays, or materials lost in transit. Builder’s risk insurance for homeowners may cover hard costs (labor and materials) and soft costs (permits, loan interest, lost rental income).
3. Research insurance providers: Policies vary widely. Compare insurers based on experience with your project type, what their standard coverage includes, and which protections require add-ons.
4. Obtain home builder’s insurance quotes: Request quotes from several insurers to compare costs, deductibles, and coverage. If you’re unsure how to evaluate offers, our guide to questions to ask a mortgage lender can help you think through the right questions for insurance providers, too.
5. Review the policy’s terms: Read the fine print carefully. Pay attention to covered and excluded hazards, limits, timelines, and whether temporary structures or off-site materials are included. Confirm that all required parties are named on the policy.
6. Purchase your coverage: Choose the policy that best fits your project, timeline, and budget, then share proof of insurance with your contractor or lender. Many builders won’t begin work until coverage is in place, so securing a policy early helps keep your project on track.

The bottom line: Builder's risk insurance offers valuable protection for your project

Builder’s risk insurance can be a valuable safeguard during construction, renovation, or remodeling. It helps protect against weather damage, theft, and other setbacks that could disrupt your project. Since coverage varies, it’s important to review your needs and choose a policy that fits your goals.

Rocket Mortgage doesn’t offer construction loans, but you may still be able to finance part of your project through other available products, such as a home equity loan for a renovation.

If you’re ready to explore which loan options fit your plans, connect with a Home Loan Expert at Rocket Mortgage today.

The bottom line: Builder’s risk insurance makes sense for some

Whether you’re building your dream home or a room addition, you’ll want to insure the construction process from top to bottom. General contractors and homeowners alike can benefit from builder’s risk insurance for their construction projects. Partnering with an experienced insurance broker or company will give you an added sense of security and help make your vision a reality.

Rocket Mortgage® doesn’t offer construction loans at this time. However, we do provide alternative loan products – like our Home Equity Loan – that could help you finance a home renovation or project. Speak with one of our Home Loan Experts and start your application today.