Builders risk insurance: the policy on a building that does not exist yet

No statute requires it. In Texas, the Property Code chapter that governs construction is the mechanic's lien chapter, and its subchapters are about lien procedures, priorities, payment bonds, and waivers, not insurance (Tex. Prop. Code Chapter 53). Builders risk is required by the construction contract or the loan, and the contract usually says who buys it. The AIA's standard general conditions, as IRMI reads the 2017 edition, leave it with the owner: "The owner remains responsible for procuring the required property insurance, paying the premiums and deductibles, and adjusting claims with insurers." The policy is to be on "a builders risk 'all risks,' completed value, or equivalent form," insured for the total project value including change orders and materials supplied by others, and it must "include the interests of the owner, contractor, subcontractor, and sub-subcontractors in the project as insureds" (IRMI, Builders Risk: New AIA Requirements). As an earlier IRMI commentary puts it, "The construction documents will usually require that the owner and the general contractor be covered by the same builders risk policy" (IRMI, Key Considerations When Buying Builders Risk Coverage). The contractor buys it instead often enough that IRMI writes about contractor "master" programs and the "wrap-around" coverage a contractor can add to fill gaps in an owner's policy, and notes that an owner "may find that the GC is able to secure the policy with better coverage terms and a more competitive premium" (IRMI, Builders Risk: Don't Overlook Contractors' Policies; IRMI, Builders Risk Insurance: Is It Always Necessary?). Lenders may require the policy in the loan agreement and ask to be protected as an insured or loss payee.

The named insured line. Whoever buys it, the policy names one party as the named insured and everyone else as something less, and some coverages reach only the first. IRMI: "While the project owner, general contractor, and subcontractors are usually named as insureds on builders risk policies for damage to the project, the same does not hold true for the delay/soft costs coverages," where "the project owner and its affiliated entities are the only named insureds" in most cases, the reason being "to preserve the insurance limits solely for the owner" (IRMI, Builders Risk: Naming of Insureds for Delay and Soft Costs Coverages). What happens when the structure is inverted is on the record. In a case decided by the Eighth Circuit in June 2025, as IRMI reports it, the general contractor building a Missouri apartment complex bought the policy and the owner was listed as an additional named insured. A retaining wall collapsed, the project was delayed, and the owner claimed about $1.4 million in lost rental income and soft costs. The claim was denied because those coverages ran to "you," which the policy defined as the named insured, the contractor. The court: "An 'Additional Named Insured' is not covered for lost rental value and soft costs; only a 'Named Insured' is covered for such losses," an additional named insured being covered "only to the extent of their financial interest in the Covered Property" (IRMI, BCC Partners v. Travelers). For a general contractor the lesson is procedural: if you are buying the policy on the owner's behalf, the owner's soft costs need the owner named where the form pays them, and that is a question to settle before the policy binds, not after the wall goes.

Two ways to write the limit, per IRMI's definition above: completed value, where the policy is issued for the estimated finished value of the project from the start, or a reporting form, where values are reported as they change. Either way the limit is the estimated completed value, which is the number to get right at the outset, since the AIA conditions tie it to the contract sum plus change orders plus materials others supply. The value actually at risk starts near zero and climbs: "the insured value of the project increases over the term of the policy as the construction progresses," and "Coverage under builders risk typically ends when the construction is complete" (IRMI, Building the Right Builders Risk Policy). The form defines what "complete" means to it, and the definitions differ, so a project that finishes late or is occupied in phases needs the term checked against the schedule rather than assumed. Ask the agent three things: what the limit is and how it was built, what the form says ends coverage, and whether materials in storage and in transit are inside the limit or carry sublimits of their own.

Defective work is the firm exclusion. IRMI: "Most builders risk insurers will not provide coverage for the cost of making good defective design, workmanship, or materials," and, in a later commentary, "builders risk policies will not pay for the cost to redo sloppy or faulty work" (IRMI, Key Considerations; IRMI, Builders Risk Policies: Are You Really Covered?). The typical property-form wording excludes loss caused by "Faulty, inadequate or defective" planning, design, specifications, workmanship, construction, or materials, and what softens it is the ensuing loss clause: "While the insurance company need not pay for damages caused solely by the excluded cause of loss, if there is an 'ensuing loss,' the insurer must pay for that damage." The example IRMI uses is the one every electrician knows: faulty wiring causes a fire, the fire damage is paid, the wiring is not (IRMI, Ensuing Loss). Whether your form has an ensuing loss clause, and how it is worded, is the difference between a covered fire and an uncovered one. Land and water are commonly excluded as well; the policy in one case IRMI discusses excluded "Land (including land on which the property is located) or water."

The acts-of-God perils are handled form by form. This page does not tell you that earthquake or flood is "typically excluded," because no published source says so. What IRMI does say is that "builders risk policies routinely incorporate sublimits," that "earth movement" is broader than "earthquake" and the better term to ask for, and that flood and water damage are different perils that should each be named (IRMI, Builders Risk: Needed Changes to AIA General Conditions). At the other end, IRMI quotes one national insurer's endorsement to its completed value form excluding "Loss or damage caused by or resulting from Acts of God including but not limited to Earthquake, Flood, and Windstorm," and notes the policy does not define the phrase (IRMI, Builders Risk: Acts of God). So the question for each of earth movement, flood, windstorm, and named storm is the same: covered in full, covered to a sublimit with its own deductible, added by endorsement, or excluded, and the answer is on your form and nowhere else.

Soft costs are the add-on. IRMI's glossary calls delayed completion coverage "An optional coverage provided by most builders risk/marine cargo policies" that "insures against income loss or specified additional expenses (such as additional interest charges and advertising expenses) that result from a delay in the completion of a construction project as a result of covered property damage," also sold as delay in start-up, delayed opening, soft costs, or advance loss of profits (IRMI, delayed completion coverage). The purpose "is to insure the economic risks caused by project delays resulting from a covered peril": interest on the construction loan, taxes, lease renegotiation, extended equipment rental, added premiums. It is written for the owner and the lender, since "a contractor does not have 'business income,' 'rental value,' or 'soft costs' exposures like a project owner has," which is the whole reason the named insured section above exists.

Inputs rather than a price, because the premium is a function of the project. The completed value leads, since it is the limit. Then what is being built and from what: a wood-frame apartment block and a steel-and- concrete office read differently to a property underwriter, and a renovation of an occupied building differently again. The term, because a longer build holds a rising value at risk for longer, and an extension mid-project is a re-rate. The location and the perils it brings, and for each of earth movement, flood, and wind whether the form covers, sublimits, endorses, or excludes it. The deductibles, and any separate deductible attached to a sublimited peril. Whether soft costs are added, and at what limit and waiting period. The protective safeguards the policy conditions on, fencing, lighting, security, and fire protection among them, which some forms make warranties. And the contractor's record, on this kind of project, with this kind of loss. An agent who writes construction can price a described project; nobody can price an undescribed one, and a premium quoted before those questions are answered is a placeholder.

The contract answers first, and the question underneath it is whether the project's property is already insured somewhere. IRMI's William Austin walks through the cases. An owner with a commercial property policy in force "may be able to use its existing building and personal property coverage form for the construction exposure instead of a separate builders risk policy," because the ISO building definition already reaches "additions under construction, alterations and repairs to the building or structure; materials, equipment, supplies and temporary structures on or within 100 feet of the described premises." For a renovation of an existing building his answer is "Probably not, as most property insurance policies readily cover this exposure without any sublimit or time limitation." For new construction there is no existing policy to lean on, and the owner may buy it or "may find that the GC is able to secure the policy with better coverage terms and a more competitive premium." And a subcontractor whose work is not named on anyone's builders risk policy "may decide to separately insure their exposures outside of an owner- or GC-provided builders risk policy by use of an installation floater" (IRMI, Builders Risk Insurance: Is It Always Necessary?).

So the one question for a general contractor before mobilizing is: whose policy insures this project's property today, and am I on it? If the owner carries it, get the certificate and read the insureds line for your company and your subs. If nobody does, and the contract is silent, the property on that site is uninsured until someone buys the policy, and the materials you have staged there are yours until they are installed. That is a live question for the electrical contractor whose switchgear arrives months before it is set, and for the roofing contractor on a new build whose membrane and insulation sit on a deck through a storm season. Where the state writes insurance requirements into a trade license, those requirements are liability minimums, not property ones; our electrical contractor requirements guide reads eight of them and none mentions builders risk.

General liability responds to four categories of events a business can be held responsible for, in the NAIC's list: bodily injury, damage to others' property, personal injury, and advertising injury (NAIC, Insure U: Small Business Insurance). The project you are building is not "others' property" in the way the form means it. Liability forms commonly carry a care, custody, or control exclusion, which IRMI describes as eliminating coverage for damage to property in the insured's care, custody, or control (IRMI, care, custody, or control), and a half-built structure with your crew on it is the paradigm case. Builders risk is the first-party answer to that gap: it pays the insured for the project, and it does not care whose fault the fire was. General liability pays the neighbor whose fence the crane took down and the delivery driver who fell in the trench. The two policies do not overlap and neither substitutes for the other, and a contract that asks for both is asking for two different things. The other fill on this site, for the loss the liability form's pollution exclusion removes, is on the contractors pollution liability page. For how the whole set fits together, start at the overview.