What is Builders Risk Insurance?
Builders risk insurance (also called course of construction insurance) is a specialized property insurance policy that covers buildings under construction or renovation against damage from fire, weather, theft, vandalism, and other covered perils. Standard property insurance policies often exclude or limit coverage for properties under active construction because the risk profile is different — open structures, exposed materials, temporary utilities, and construction activity all increase the likelihood of damage.
For fix-and-flip investors and anyone doing significant renovations, builders risk insurance fills the coverage gap between purchasing the property and completing the renovation. Without it, a fire or storm that damages the property during renovation could result in a total loss with no insurance recovery.
What builders risk covers
- Fire and lightning damage to the structure
- Wind, hail, and storm damage
- Vandalism and malicious mischief
- Theft of building materials stored on site
- Water damage (burst pipes, rain through open construction)
- Materials in transit to the job site (some policies)
- Temporary structures (scaffolding, construction trailers)
When you need builders risk
Get builders risk coverage whenever you're doing renovation work significant enough to void or limit your standard property insurance. Most property insurance policies require notification of renovation activity and may exclude claims related to construction. A gut renovation where the house is stripped to studs is clearly a builders risk situation. A cosmetic refresh (paint and flooring) may not require separate coverage — check your existing policy terms.
Hard money lenders and many conventional lenders require builders risk insurance as a condition of the renovation loan. They want assurance that their collateral (the property) is protected during the construction period.
Costs
Builders risk insurance typically costs 1-4% of the total construction cost annually. For a $200,000 renovation, expect to pay $2,000-$8,000 for the policy period. Policies are typically written for the expected construction duration (6-12 months) and can be extended if the project runs longer. Some investors include builders risk as a line item in their renovation budget to ensure it's accounted for in deal analysis.