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When planning a custom home or cottage, every detail matters—from site layout and material choices to timelines and trades. But one critical element that often gets overlooked early in the process is builders risk insurance. It plays a crucial role in protecting your investment long before the final coat of paint is applied.

Despite its importance, it’s not always clear how this type of insurance works or why it’s included in many professional builds. Taking a closer look at builders risk insurance can give you a better understanding of how your project is protected while it’s still in progress.

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Builders risk insurance is part of every custom project we manage. It’s one of several ways we help protect your home while it’s being built. Learn how our insurance support fits into a well-managed, worry-free construction process.

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What Is Builders Risk Insurance?

Builders risk insurance is a type of property insurance that covers a home or structure while it’s under construction. It protects against physical loss or damage caused by events such as fire, theft, vandalism, certain weather-related incidents, and other unforeseen hazards that can occur on a building site.

Unlike a homeowner’s policy—which generally only applies once construction is complete, builders risk insurance is designed specifically for the construction phase. It covers not just the structure itself, but also materials, equipment, and in some cases, temporary structures used during the build.

The exact terms can vary, but at its core, builders risk insurance exists to safeguard your investment from the moment ground is broken until the project is ready for occupancy.

Why Is Builders Risk Insurance Necessary?

Construction sites are unpredictable by nature, and without proper coverage, even minor incidents can create major setbacks. Here’s why it is considered essential on any professional build:

1. Covers Damage Before Completion

Fire, vandalism, theft, and severe weather can damage materials or partially completed structures. The insurance helps cover the cost of repairs or replacements during construction.

2. Protects Building Materials On-Site and In Transit

Materials stored on location—or being transported to the site—are often targeted for theft or exposed to damage. This insurance can cover losses in either case.

3. Fills the Gap Left by Standard Home Insurance

Most homeowner insurance policies don’t apply to homes that are still under construction. Builders risk insurance fills that critical gap.

4. Satisfies Lender and Contract Requirements

Many banks and financial institutions require this coverage as a condition for construction financing. It’s also a common requirement in contracts between homeowners and builders.

5. Minimizes Financial Disruption During Setbacks

If a covered loss occurs, the insurance helps ensure the project stays on track without unexpected out-of-pocket costs or delays.

Who Needs Builders Risk Insurance?

This type of construction coverage applies to anyone with a financial or contractual role in a building project. While policies can be structured in different ways, the following parties are typically involved in the decision or benefit from the protection it offers:

1. Homeowners and Property Owners

Those funding the build have the most to lose if something goes wrong during construction. Coverage helps safeguard their investment through every phase of the project.

2. Builders and General Contractors

Contractors often carry coverage to protect their work, equipment, and timelines—especially when they’re supplying materials or managing site operations.

3. Developers and Project Managers

Larger-scale projects, such as multi-unit developments, require risk protection across various locations and stages. Having centralized coverage simplifies that process.

4. Lenders and Financial Institutions

Before releasing funds, lenders usually require proof of insurance to secure the value of the structure during construction. It's a standard part of most financing agreements.

5. Design-Build Firms and Construction Managers

Firms that handle both planning and execution often include risk coverage in their scope of responsibility, ensuring continuity from design through to completion.

What’s Covered in Builders Risk Insurance and What’s Not

It offers protection against many of the risks that come with active construction. While coverage can vary by policy, most plans share a common set of inclusions and exclusions that are important to understand before your project begins.

What’s Typically Covered

At its core, builders risk insurance protects the physical work in progress. This includes the structure itself as it’s being built, along with materials, fixtures, and supplies stored on-site or in transit. Damage caused by fire, vandalism, theft, and certain weather-related events—such as wind or lightning—is generally covered. Many policies also include provisions for temporary structures like scaffolding or fencing, and some extend to debris removal and cleanup following a covered loss.

• Structural damage during construction
• Materials on-site, in storage, or in transit
• Theft or vandalism of materials or equipment
• Temporary structures used during the build
• Cleanup or debris removal after a covered incident

What’s Typically Not Covered

Despite its broad protection, this type of insurance does not cover everything. Losses caused by faulty workmanship, poor design, or construction errors are excluded and may fall under different policies such as professional liability. Likewise, wear and tear, rust, or gradual deterioration are not covered. Damage from floods or earthquakes is often excluded unless specifically added. Employee theft and subcontractors’ personal tools are also typically outside the scope of standard coverage.

• Faulty construction or design errors
• Normal aging or deterioration of materials
• Damage from earthquakes, floods, or acts of war
• Theft by workers or subcontractor-owned tools
• Business interruption or loss of income

Understanding these limitations is key to making sure your project is properly protected from start to finish—and knowing when additional coverage or policy extensions may be necessary.

Final Thoughts

Builders risk insurance plays a critical role in protecting your investment during one of the most vulnerable phases of the homebuilding process. It helps ensure that unexpected damage or loss doesn’t derail your project or create costly setbacks. Whether you're a homeowner, builder, or lender, understanding how this coverage works—and what it does and doesn't include—is essential to responsible planning.

At Tech Home, builders risk insurance is included as part of every custom build we manage. It’s one of several ways we help ensure each project runs smoothly from the first site visit to final completion.

Have Questions About Builders Risk Insurance?

Our team can walk you through how builders risk insurance fits into your custom home project. If you’re planning a new build, let’s start the conversation.

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