Builder’s risk insurance (also called course of construction insurance) is a property policy that protects the project from the time construction starts until it’s completed or occupied. It covers losses from fire, theft, vandalism, wind, hail, and other named perils that might damage the building or materials during construction. The policy is typically taken out by the builder or the owner and is a required document that lenders ask for before funding the first draw.
Builder’s risk is distinct from the general contractor’s general-liability insurance (GL), which covers bodily injury and property damage caused by the contractor’s work or operations. GL insurance protects against lawsuits; builder’s risk protects the building itself. On large projects, the general contractor may be required to carry both builder’s risk and GL. On residential projects, the owner or builder may carry builder’s risk while the general contractor carries GL. The policy should be kept in force until the project reaches substantial completion and has passed final inspection, at which point the permanent homeowner’s insurance takes over. Gaps in coverage or expired policies can create claims issues if damage occurs, so timing and continuous renewal are important.