Builders Risk Insurance in 2026: What It Costs, Who Pays, and the Exclusions That Wreck Commercial Projects
Owner Finance and Risk · Updated August 16, 2026
Builders Risk Insurance in 2026: What It Costs, Who Pays, and the Exclusions That Wreck Commercial Projects
Builders risk insurance cost for commercial construction runs 0.08% to 0.25% of hard cost for non-combustible ground-up work in a low catastrophe zone on a 12 month term, or $0.08 to $0.25 per $100 of completed value. Wood frame runs 0.35% to 1.0%. The owner usually buys the policy and pays the deductible.
- 0.08% to 0.25% of hard cost is the 2026 planning band for non-combustible ground-up commercial work on a 12 month term.
- Carriers quote a rate per $100 of insured value. A $20,000,000 completed value at $0.14 per $100 is $28,000 of premium before taxes and fees.
- A 3% named windstorm deductible on $20,000,000 is $600,000, so a $400,000 storm loss pays exactly zero.
- Under AIA A201 the owner is the default purchaser of property insurance on the work, and the owner pays the deductible.
- On a $3,000,000 structural defect event, LEG 3 can recover about $2,400,000 where LEG 1 can be argued to nothing.
- A six month delay after a covered fire at 9% on $14,000,000 drawn is roughly $630,000 of extra loan interest, none of it covered without a soft costs extension.
Builders risk insurance at a glance, 2026
| What you are deciding | 2026 planning figure | Basis |
|---|---|---|
| Premium, non-combustible ground up, low catastrophe zone | 0.08% to 0.25% of hard cost | 12 month term, standard sublimits |
| The rate carriers actually quote | $0.08 to $0.25 per $100 | Applied to completed insured value |
| Premium at $20,000,000 completed value, steel frame, inland | $18,000 to $38,000 | Before taxes, surplus lines fees, broker fees |
| Premium, wood frame commercial and mixed use | 0.35% to 1.0% of hard cost | Open-frame fire loss severity |
| Flat all other perils deductible | $10,000 to $50,000 | Per occurrence, dollar amount |
| Named windstorm deductible, Tier 1 coastal county | 2% to 5% of insured value | $400,000 to $1,000,000 at $20,000,000 |
| Who buys it and who eats the deductible | The owner, by default | AIA A201 Article 11, unless the contract shifts it |
| Term to buy | CPM schedule plus 90 days | A 6 month term costs 60% to 65% of a 12 month premium |
| Defect exclusion to request | LEG 3, fall back to LEG 2 | Never accept LEG 1 without pricing the alternate |
| Soft costs and delay in start-up | Separate scheduled limit | 15 to 30 day waiting period is typical |
Basis: 2026 national planning ranges with regional multipliers applied, ground-up construction unless noted. These are not quotes, bids, or binders.
- What builders risk covers, and what it does not
- What does builders risk insurance cost in 2026?
- Deductibles: the number owners forget to reserve
- Who pays for builders risk, owner or contractor?
- Coverage extensions that actually decide claims
- The exclusions that wreck projects: LEG 1, 2, 3
- Claim reality: what you need before the loss
- What this costs you if you get it wrong
- Your next 30 days: the pre-mobilization checklist
- Builders risk glossary
- How TCG delivers this
- Builders risk insurance FAQ
What builders risk covers, and what it does not
Builders risk is first party property insurance on the work in progress. It covers the building you are constructing, the materials staged to become part of it, and in many forms the temporary works that support it, against physical loss from covered perils. Course of construction insurance is the same product under a different name. Nothing else in the construction insurance program does this job.
Owners get into trouble because a certificate of insurance from the general contractor looks like protection. It is not. A certificate showing $2,000,000 of commercial general liability tells you the GC can respond if their operations hurt a third party. It says nothing about who rebuilds your half-erected structure after a fire. Reading those certificates correctly is the same discipline as reading a bid correctly, which we cover in how to read a commercial GC bid.
Two documents settle the question, and neither one is a certificate. The first is the insurance exhibit attached to your owner and contractor agreement. The second is the binder itself, with the deductible schedule and the sublimit page attached. We read both during independent bid review, because the certificate stack shows up with the proposal, not after award.
Builders Risk
Property on the work
Pays forYour own installed work, materials, and equipment awaiting installation after fire, wind, hail, theft, vandalism, water damage, collapse, and other covered perils. Extensions can add soft costs, ordinance or law, debris removal, and transit.
Does not pay forInjury to people, damage to property that is not the work, defective design itself, wear and tear, or delay without physical damage.
General Liability
Third party harm
Pays forBodily injury and property damage to third parties caused by your operations. The neighbor's warehouse, the passerby, the adjacent parking structure you cracked while driving pile.
Does not pay forDamage to your own work in progress. That is the point of the "damage to your work" and "damage to property" exclusions in the standard Insurance Services Office form.
Workers Comp
Injured employees
Pays forMedical care and wage replacement for employees hurt on the job, on a no-fault statutory basis set state by state.
Does not pay forAnything touching the physical building or third party claims. Employers liability sits alongside it for suits outside the comp bargain.
Professional
The design and the ground
Pays forProfessional liability responds to negligent design or professional services. Contractors pollution liability responds to pollution conditions arising from the work, including mold, silt discharge, and fuel releases.
Does not pay forOrdinary construction defect without a professional act, or property damage covered elsewhere.
Surety Bond
Performance, not perils
Pays forA performance bond guarantees completion if the bonded contractor defaults. A payment bond guarantees the subs and suppliers get paid. Subcontractor default insurance is the insured alternative a large GC self-manages.
Does not pay forFire, wind, theft, or any physical peril. A bond is a credit instrument with three parties and an indemnity obligation, not insurance on the work.
Basis: comparison is general and reflects standard market forms. Your actual coverage is determined only by the policy language your broker binds. Terrapin Construction Group is a commercial general contractor, not an insurance broker, agent, or advisor.
What does builders risk insurance cost for commercial construction in 2026?
Budget 0.08% to 0.25% of hard construction cost for non-combustible ground-up commercial work in a low catastrophe zone on a 12 month term. Wood frame lands between 0.35% and 1.0% or higher. Renovation with an exposed existing structure prices above ground up on a like-for-like basis.
Carriers do not quote in percentages. They quote a rate per $100 of insured value. Multiply your completed value by the rate and divide by 100. A $20,000,000 completed value at a rate of $0.14 per $100 is $28,000 of premium before taxes, fees, and surplus lines charges. Learning to read the rate rather than the total premium is what lets you compare two quotes that carry different limits and terms. The rate bands by construction type, the catastrophe loading applied on top of them, and worked premium scenarios at a $20,000,000 completed value are set out below.
Base rate by construction type
Ground-up construction, 12 month term, low catastrophe exposure, standard sublimits. Bar shows premium as a share of hard cost.
Driver: lowest fire load during erection
Driver: panel core and staged material theft exposure
Driver: combustible roof deck, erection stability
Driver: open-frame fire loss severity
Driver: hot work, existing structure exposure, unknown conditions
Catastrophe loading applied on top of the base rate
Directional multipliers for budgeting, not underwriting factors.
| Exposure profile | Rate multiplier | Typical deductible structure |
|---|---|---|
| Benign inland, low hail, low seismic | 1.0x | Flat all other perils, $10K to $50K |
| Severe convective storm and hail corridor, Plains and Upper Midwest | 1.2x to 1.5x | 1% to 2% wind and hail |
| Wildfire urban interface, Mountain West and California | 1.4x to 2.2x | Flat plus possible wildfire sublimit |
| Tier 1 named windstorm coastal county | 1.8x to 3.0x | 2% to 5% named windstorm |
| High seismic, coastal California and Pacific Northwest | 1.5x to 2.5x | 2% to 5% earthquake, often sublimited |
| Flood zone A or V within the mapped floodplain | Add flood sublimit | Separate flood deductible, frequently $250K or more |
Worked scenarios at $20,000,000 completed value
Base rate multiplied by the catastrophe loading, 12 month term. Premium excludes taxes, surplus lines fees, and broker fees.
| Scenario | Effective rate per $100 | Premium at $20M |
|---|---|---|
| Fire resistive concrete, benign inland | $0.07 to $0.15 | $14,000 to $30,000 |
| Non-combustible steel with IMP envelope, benign inland | $0.09 to $0.19 | $18,000 to $38,000 |
| Non-combustible steel with IMP envelope, hail corridor | $0.11 to $0.29 | $21,600 to $57,000 |
| Non-combustible steel with IMP envelope, Tier 1 named windstorm | $0.16 to $0.57 | $32,400 to $114,000 |
| Joisted masonry or tilt-up, wildfire urban interface | $0.17 to $0.57 | $33,600 to $114,400 |
| Wood frame commercial, benign inland | $0.35 to $0.90 | $70,000 to $180,000 |
| Renovation or adaptive reuse, high seismic | $0.45 to $1.50 | $90,000 to $300,000 |
Basis: 2026 national planning ranges, ground-up construction unless noted, 12 month term, standard sublimits. Term length is a separate lever, a 6 month term generally costs 60% to 65% of a 12 month premium, not half. These are not quotes, bids, or binders. Terrapin Construction Group is a general contractor and does not sell, place, or bind insurance. Actual pricing depends on the completed application, loss history, site security, hot work controls, protection during construction, schedule, and the specific form and sublimits negotiated by a licensed broker.
Geography moves the number more than construction type does. The 2026 property market has softened materially from the 2023 peak, with catastrophe reinsurance capacity abundant and primary property rates down across most classes for the first time since 2017. That relief is real, and non-catastrophe ground-up builders risk placements have seen single digit decreases. It has not made a Gulf Coast distribution center price like a Kansas City one, and the loss record behind that spread is public at NOAA National Centers for Environmental Information.
Term length is the third lever. Builders risk is written for the projected schedule plus a buffer. Rate does not scale linearly with months, because acquisition cost is fixed and because a longer schedule means more storm seasons under exposure. A 6 month term generally costs 60% to 65% of a 12 month premium, not half. Extensions after expiration are priced at the carrier's discretion and are almost never cheap, which is one more reason schedule slip is expensive. If your schedule assumptions are soft, tighten them in preconstruction before you buy the policy.
A policy term that expires before substantial completion is the most expensive mistake on this page, and the fix is an honest baseline rather than an optimistic one. Our preconstruction timeline guide shows where the months actually go between concept and groundbreaking. Buy the term against that schedule plus 90 days, and put the extension provision in writing at binding rather than negotiating it under duress in month 14.
Deductibles: the number owners forget to reserve
Flat deductibles are simple. Percentage deductibles are the ones that hurt. A flat all other perils deductible of $25,000 on a $20,000,000 project is a rounding error. A 3% named windstorm deductible on the same project is $600,000, and it is calculated against the insured value, not against the size of your loss.
That distinction matters enormously. If a named storm causes $400,000 of damage to a project carrying a 3% named windstorm deductible on $20,000,000 of value, the deductible exceeds the loss and the policy pays nothing. The owner absorbs the whole event. This is not a carrier trick. It is standard catastrophe deductible architecture, and it is why the deductible reserve belongs in your contingency plan, not in your hope pile. We size project contingency by asset type in our contingency guide, and a catastrophe deductible is one of the few line items that argues for carrying reserve above the standard band.
Where the deductible dollars sit on a $20,000,000 project
Out of pocket before the policy pays a dollar, by deductible structure.
Dollar exposure at common project values
Percentage deductible applied to insured value. The same number is also the loss size below which you recover nothing.
| Insured value | Flat all other perils | 1% wind and hail | 2% named windstorm | 3% named windstorm | 5% earthquake |
|---|---|---|---|---|---|
| $5,000,000 | $25,000 | $50,000 | $100,000 | $150,000 | $250,000 |
| $10,000,000 | $25,000 | $100,000 | $200,000 | $300,000 | $500,000 |
| $20,000,000 | $25,000 | $200,000 | $400,000 | $600,000 | $1,000,000 |
| $50,000,000 | $25,000 | $500,000 | $1,000,000 | $1,500,000 | $2,500,000 |
| $100,000,000 | $25,000 | $1,000,000 | $2,000,000 | $3,000,000 | $5,000,000 |
The scenario owners miss
Actual loss from the event on a $20,000,000 project
Calculated on insured value, not on the size of the loss
The deductible exceeds the loss. The owner absorbs the whole event.
Basis: percentage deductibles are typically applied to total insured value at the location, though some forms apply them to the value at risk at the time of loss. Confirm the calculation basis in writing with your broker. It changes the number by a lot on a phased project. Flat all other perils shown at $25,000 for illustration, market range is commonly $10K to $50K. Terrapin Construction Group is a general contractor, not an insurance broker or advisor.
Ask one more question before you accept the deductible schedule. Is the percentage applied to total insured value, or to the value at risk on the date of loss? On a phased project that single word changes the number by hundreds of thousands of dollars, because a storm in month four hits a building that is 30% complete while the deductible may still be calculated on the full completed value. An owner's representative earns the fee on that one question alone.
Flood and earth movement deserve their own line. Both are excluded from the base grant on most forms and added back with a separate limit and a separate deductible, frequently $250,000 or more. Confirm your flood zone determination against the mapping published by FEMA before you assume the exposure is theoretical.
Who pays for builders risk insurance, owner or contractor?
Under the AIA A201 general conditions, the owner is the default purchaser of property insurance on the work and the owner pays the deductible. The A201 2017 edition moved the detailed insurance requirements into an exhibit attached to the A101 owner and contractor agreement, so the numbers live in one place and the obligations live in Article 11. Confirm your edition against the current family published by AIA Contract Documents, because the 2007 and 2017 texts differ in structure.
Three provisions decide whether the program works.
- Who procures. The owner buys property insurance on the work at completed value on an all risk or equivalent form. If the owner does not, the contract typically requires notice, and the contractor may procure it with the cost charged back. Silence on this point is how a project mobilizes uninsured.
- Who is insured. The form should name the owner, the contractor, and subcontractors and sub-subcontractors as insureds or additional named insureds for their interests. A sub who is not an insured is a subrogation target.
- Waiver of subrogation. The owner and contractor waive rights against each other and against subs, architects, and consultants for damages covered by the property insurance. This is the provision that stops the carrier from paying the owner and then suing the mechanical sub who left the torch running. It only works if every downstream subcontract carries a matching waiver and the policy endorses it.
ConsensusDocs allocates the same duties with different default assumptions, and negotiated owner forms often flip the obligation to the contractor entirely. Contractor-provided builders risk is common on design-build delivery and on repeat-client programs, and it can be cleaner because one party controls the form, the deductible, and the claim. What is never acceptable is ambiguity. If the contract says "contractor shall maintain such insurance as is customary," you do not have a program. You have a lawsuit waiting for a windstorm.
The gap that keeps recurring. Owner assumes the GC carries builders risk because the GC sent a certificate. GC assumes the owner carries it because the AIA form says so. Nobody buys it. The first loss lands on whoever has the weaker lawyer. Fix it with one email before mobilization: who is buying, what limit, what deductible, what term, who is named.
The lender has an opinion too. Construction lenders require evidence of builders risk naming them as mortgagee and loss payee before the first advance, and the requirement usually shows up as a condition precedent in the loan agreement. That interacts directly with your funding mechanics, which we map in the construction loan draw schedule guide. The takeout side carries its own insurance conditions, walked through in construction to permanent loan conversion. The title side of the closing has a separate product entirely, explained in our title insurance guide, and it does not overlap with builders risk at any point.
Coverage extensions that actually decide claims
Base builders risk pays to repair physical damage to the work. Every dollar of consequence beyond that requires an extension you specifically bought, with its own limit. Below are the ones that come up in real commercial claims.
Soft Costs And Delay In Start-UpMost Missed
Extended loan interest, additional A and E fees, re-permitting, legal and accounting, marketing, real estate taxes, insurance during the delay.
Typical sublimit patternScheduled limit plus 15 to 30 day waiting period
Loss Of Rents And Business Income
Pre-leased income you do not collect because the opening slipped after a covered loss.
Typical sublimit patternScheduled by month, separate from soft costs
Ordinance Or Law
Pays the cost of rebuilding to the current code rather than the code in effect at permit, plus demolition of undamaged portions.
Typical sublimit patternCoverage A, B, and C, often sublimited
Debris Removal
Hauling the destroyed work off site before you can rebuild.
Typical sublimit pattern25% of loss, plus an additional stated amount
Testing And Commissioning
Damage during load testing, startup, and functional performance testing of installed systems.
Typical sublimit patternOften limited to cold testing unless endorsed
Off-Site Storage And TransitWatch In 2026
Material in a laydown yard, a third party warehouse, or on a truck before it reaches the site. Long lead switchgear, transformers, generators, and large air handling units now sit in storage for months.
Typical sublimit patternSeparate sublimits, commonly $250K to $1M each
Temporary Structures, Scaffolding, Forms, Falsework
Shoring, formwork, jobsite trailers, temporary power and enclosure.
Typical sublimit patternModest sublimit, frequently overlooked
Flood And Earth Movement
Perils excluded from the base grant and added back with their own limit and deductible.
Typical sublimit patternAnnual aggregate sublimit
Theft Of MaterialsWatch In 2026
Copper wire, switchgear, rooftop units, staged insulated metal panels, tools of the trade. Most theft grants condition payment on reasonable security.
Typical sublimit patternSublimited, security conditions attached
Expediting And Extra Expense
Overtime, premium freight, and air shipping to compress the rebuild.
Typical sublimit patternStated amount, easy to underbuy
Basis: sublimits shown are common market patterns for 2026 commercial builders risk placements, not guarantees. Verify every line on your own binder. Terrapin Construction Group is a commercial general contractor, not an insurance broker, agent, or advisor. Confirm all coverage with a licensed broker and construction counsel.
Two of these deserve extra attention on 2026 projects. Off-site and transit matters because long lead equipment now sits in third party warehouses for months. Switchgear, transformers, generators, and large air handling units routinely arrive before the pad is ready, and the sublimit that felt generous in 2021 does not cover a single gear lineup today. Check the lead time reality in our switchgear and generator lead times guide and then check your off-site sublimit against the actual invoice values.
Power gear waits longest when the utility is the bottleneck, and that wait happens in a warehouse you do not control. The study, design, and energization sequence behind it is mapped in our utility power interconnection timeline and cost guide. Dock equipment is the same problem at a smaller unit value and a higher count, since levelers, seals, shelters, and restraints often land before the slab is poured. Per door values are broken out in our loading dock equipment cost guide, and those are the numbers your off-site sublimit has to carry.
Theft matters because copper and staged panel theft has climbed with metals pricing, a trend the National Insurance Crime Bureau tracks across equipment and material classes. A jobsite with 40,000 SF of insulated metal panel banded on grade is a target, and most theft grants condition payment on reasonable security. Fencing, lighting, camera coverage, and a documented material staging plan are not just good practice. They are underwriting representations you made on the application.
Panel type changes the theft and fire conversation more than most owners expect, and the tradeoffs are laid out in our comparison of metal building insulation systems. We self-perform envelope work through our IMP installation group, which means the staging plan, the banding sequence, and the delivery cadence are ours to control rather than a sub's to promise.
Delay in start-up has a temperature problem on cold projects. A freezer cannot be pulled down until the slab and the under-slab systems are ready, so a covered loss in the envelope pushes commissioning by more than the repair duration alone, a sequence detailed in our freezer floor systems guide. Schedule that reality into the delay period when you buy the extension on any cold storage and warehouse project.
The exclusions that wreck projects: LEG 1, LEG 2, LEG 3
Every builders risk form excludes something about defects. The question is how much. The London Engineering Group clauses are the market shorthand, and the spread between them is the single largest coverage variable in the form.
LEG 1
Outright defects
All loss or damage arising from defective workmanship, material, or design.
What is paidOnly damage with no defect in the chain of causation.
Avoid
This is the narrowest grant.
LEG 2
Consequences
The cost that would have been incurred to correct the defect immediately before the damage occurred.
What is paidThe resulting damage to the rest of the work.
Common Market Position
Acceptable with eyes open.
LEG 3
Improvement
Only costs that improve on the original design, material, or workmanship.
What is paidResulting damage plus the cost to restore to the original standard.
Best Available
Ask for it, expect to pay for it.
One scenario, three outcomes
A poorly welded connection fails and drops a bay of steel and deck on a $3,000,000 structural event.
The carrier can argue the entire loss traces to defective workmanship and decline.
The weld itself is excluded, but the collapsed steel, deck, and everything it damaged is covered.
Resulting damage plus the cost of putting the connection back to the specified standard. Only a genuine betterment is carved out.
Basis: wording versions vary by market. Read the clause attached to your policy, not a summary. Builders risk is not a warranty and never pays to correct work that is simply wrong but has not caused damage. Recovery figures are illustrative of the spread on a single structural defect claim, not a coverage opinion. Terrapin Construction Group is a general contractor, not an insurance broker or advisor. Confirm the clause on your form with a licensed broker and construction counsel.
Run the same scenario through all three. A poorly welded connection fails and drops a bay of steel and deck. Under LEG 1 the carrier can argue the entire loss traces to defective workmanship and decline. Under LEG 2 the weld itself is excluded, but the collapsed steel, deck, and everything it damaged is covered. Under LEG 3 you also recover the cost of putting the connection back to the specified standard, and only a genuine betterment is carved out. On a $3,000,000 structural event that spread is most of the claim.
Note what none of them do: builders risk is not a warranty. It never pays to correct work that is simply wrong but has not caused damage. That is a contract and workmanship issue, and long-tail exposure runs on the statutory clock covered in our construction defect statute of limitations guide.
Confirm the water damage, faulty design, and cyber exclusions as well, plus any protective safeguards warranty requiring functioning fire watch during hot work. Those warranties trace back to NFPA 241 for safeguarding construction operations and NFPA 51B for hot work, and property carriers write them into the policy as conditions rather than suggestions. A breached protective safeguards warranty voids the fire claim it was written to protect.
Claim reality: what you need before the loss, not after
Claims are won with documentation created before anything went wrong. Adjusters reconstruct value from your records. If your records are thin, the adjuster's estimate becomes the ceiling.
| Record | Why the adjuster needs it | Cadence |
|---|---|---|
| Dated site photography, full perimeter and interior | Establishes progress and pre-loss condition. An unphotographed site is an argument you will lose. | Weekly, plus before every storm event |
| Schedule of values and approved pay applications | Proves installed value at the date of loss | Monthly with the draw |
| Material invoices and delivery tickets for stored material | Substantiates off-site and on-site stored material values | On receipt |
| Daily reports, weather logs, and manpower counts | Establishes causation timing and supports delay measurement | Daily |
| Baseline CPM schedule and monthly updates | Required to prove the delay period on any soft costs claim | Monthly |
| Security plan, fencing, lighting, and camera records | Satisfies theft coverage conditions and rebuts the unattended property argument | Standing, with incident log |
| Hot work permits and fire watch logs | Preserves the fire claim under a protective safeguards warranty | Per operation |
Table: pre-loss documentation. Build this in the first two weeks of mobilization and maintain it monthly. Loss prevention data sheets published by FM are the reference most property underwriters expect a jobsite fire protection plan to follow.
A loss also collides with your money mechanics. Insurance proceeds usually flow to the lender or an insurance trustee, not directly to the owner, and they are released on a schedule that looks like a draw. Meanwhile the rebuild generates new subcontracts, new lien rights, and new retainage. Filing deadlines do not pause for a fire, as our mechanics lien timing by state guide makes clear. Proceeds should not be released against anything but a properly executed waiver of the correct type, covered in lien waiver types. Retainage on rebuilt work then needs its own release path, which we detail in retainage release mechanics.
What this costs you if you get it wrong
Specific dollars, on a $20,000,000 project.
- No policy in force at mobilization. A trailer fire at 15% complete destroys $3,000,000 of work in place. Uninsured, that is equity, and the loan does not advance against destroyed work.
- Named storm deductible you never reserved. 3% of value is $600,000. If it is not in contingency, it comes out of the developer's promote or out of a capital call at the worst possible moment.
- No soft costs extension. A six month delay after a covered fire at a 9% construction loan rate on $14,000,000 drawn is roughly $630,000 of additional interest. Add re-permitting, A and E re-issuance, extended general conditions, and the number clears $1,000,000. None of it is covered by base builders risk.
- LEG 1 instead of LEG 2 or 3. A structural defect event that would recover $2,400,000 under LEG 3 can be argued to zero under LEG 1.
- Off-site sublimit too small. A $900,000 switchgear lineup sitting in a warehouse under a $250,000 off-site sublimit leaves $650,000 uninsured, plus a 40 week replacement lead time.
- Occupancy without endorsement. Moving a tenant into phase one can terminate coverage on the whole project. A loss the next week finds no policy at all.
- Missing waiver of subrogation downstream. The carrier pays, then sues your subcontractor, who tenders back to you under the indemnity clause. You pay twice for one fire.
Your next 30 days: the pre-mobilization insurance checklist
Do these before the first truck rolls. None of them require a broker to be sitting in the room, and all of them are cheaper now than they are after a loss.
Contract states in writing who procures builders risk, at what limit, on what form, and who pays the deductible
Binder or policy in hand before mobilization, not a certificate promising one is coming
Insured value equals full completed value including materials, not the contract sum net of owner-furnished equipment
Owner, contractor, subcontractors, and sub-subcontractors are named as insureds for their interests
Lender named as mortgagee and loss payee, matching the loan agreement language exactly
Waiver of subrogation endorsed on the policy and flowed down into every subcontract
Deductible schedule reviewed line by line: all other perils, wind and hail, named windstorm, earthquake, flood, water damage
Catastrophe deductible dollars reserved in project contingency and disclosed to equity
Defect exclusion clause identified as LEG 1, LEG 2, or LEG 3 and priced as an alternate if it is LEG 1
Soft costs and delay in start-up scheduled by category with the waiting period confirmed in days
Off-site storage, transit, and temporary structures sublimits checked against actual long lead equipment invoice values
Policy term exceeds the CPM schedule by at least 90 days, with a written extension provision
Occupancy and partial use permission endorsed if the project is phased
Protective safeguards, hot work, and security warranties read and assigned to a named person on site
Baseline site photography completed and a weekly photo cadence assigned before day one
Permanent property policy lined up to attach the day builders risk terminates, with no gap
The gap that keeps recurring. Owner assumes the GC carries builders risk because the GC sent a certificate. GC assumes the owner carries it because the AIA form says so. Nobody buys it. Fix it with one email before mobilization: who is buying, what limit, what deductible, what term, who is named.
Basis: pre-mobilization practice for 2026 commercial projects. Confirm every item with your licensed broker and construction counsel before relying on it. Terrapin Construction Group is a commercial general contractor, not an insurance broker, agent, or advisor.
Builders risk glossary
Ten terms that decide claims. Reference material from IRMI goes deeper on every one of them, and your broker should be able to point to where each appears on your form.
- Builders risk
- First party property insurance on the work in progress. It pays to repair or replace your own installed work, materials, and equipment awaiting installation after a covered peril such as fire, wind, hail, or theft.
- Course of construction
- The same product under a different name. Carriers and brokers use the two terms interchangeably. What matters is the valuation basis, the perils, the sublimits, and the exclusion wording inside the form, not the label on the binder.
- Soft costs coverage
- An extension that pays non-construction expenses caused by a covered delay: extended loan interest, additional architectural and engineering fees, re-permitting, legal and accounting, real estate taxes, and insurance during the delay period.
- Delay in start-up
- The time element side of the same idea. It responds to lost income and continuing expense when a covered physical loss pushes the opening date. It carries its own limit, a waiting period stated in days, and a defined delay period.
- Percentage deductible
- A deductible calculated as a percentage of insured value rather than a flat dollar amount. At 3% on $20,000,000 the retention is $600,000, which means any loss smaller than $600,000 recovers nothing.
- Named windstorm
- A storm that the National Hurricane Center has formally named. Tier 1 coastal placements commonly attach a 2% to 5% percentage deductible that applies only to loss caused by a named storm, separate from the wind and hail deductible.
- Waiver of subrogation
- A contract and policy provision under which the insured gives up, and the carrier accepts giving up, the right to recover from another project party after paying a covered loss. It only works if the policy endorses it and every subcontract flows it down.
- Additional insured
- A party added to someone else's policy by endorsement, typically the owner added to a contractor's liability policy. On builders risk the stronger position is named insured status for the owner, contractor, and subcontractors as their interests may appear.
- LEG 1, LEG 2, LEG 3
- London Engineering Group defect exclusion clauses. LEG 1 excludes all loss arising from a defect. LEG 2 excludes only the cost of fixing the defect and pays the resulting damage. LEG 3 excludes only genuine improvement on the original design, material, or workmanship.
- Ordinance or law coverage
- An extension that pays the added cost of rebuilding to the code in force at the time of loss rather than the code at permit, plus demolition and the loss of value of undamaged portions. Code cycles published by the International Code Council drive the exposure.
How TCG delivers this
We are a design-build commercial general contractor licensed in all 50 states, with in-house architecture through 3rd Act Architecture and MEP engineering through 9BA MEP. On the insurance side our job is narrow: we tell you what the policy needs to cover based on what we are actually building, we produce the documentation package that makes a claim provable, and we flag the gaps between your contract, your lender's requirements, and your binder before mobilization. We are a Procore Certified Contractor, so photo logs, daily reports, and schedule of values live in one auditable system from day one. We have installed over 1,000,000 SF of insulated metal panel across 38 states in 10 years, so we know how staged panel gets stolen and how to write a staging plan that satisfies an underwriter. We do not sell insurance. Bring your broker. We will help you interrogate the form.
Builders risk insurance FAQ
How much does builders risk insurance cost for commercial construction?
For 2026 planning, budget 0.08% to 0.25% of hard construction cost for non-combustible ground-up commercial work in a low catastrophe zone on a 12 month term. That is roughly $0.08 to $0.25 per $100 of completed value. Wood frame runs 0.35% to 1.0% or higher. Coastal named storm, hail corridor, wildfire interface, and high seismic locations can multiply the base rate by 1.5 to 3 times. Renovation and adaptive reuse price higher than ground up because the existing structure is exposed to the work.
Who pays for builders risk insurance, the owner or the contractor?
Under the AIA A201 family of general conditions, the owner is the default purchaser of property insurance on the work, and the owner also pays the deductible. Many owners assume the general contractor carries it, and many contractors assume the owner did. That assumption gap is the single most common way a project ends up with no coverage in force at the first pour. Whoever buys it, the contract should name the buyer, the limit, the deductible, the term, and the named insureds in writing before mobilization.
What is the difference between builders risk and general liability insurance?
Builders risk is first party property insurance on the work in progress. It pays to rebuild your own materials and installed work after a covered peril such as fire, wind, or theft. Commercial general liability is third party coverage. It pays when your operations cause bodily injury or property damage to someone else or to property other than the work. A fire that burns down the building you are erecting is a builders risk claim. A fire that spreads to the neighbor's warehouse is a CGL claim.
Is course of construction insurance the same as builders risk?
Yes. Course of construction insurance and builders risk insurance describe the same product. Carriers and brokers use the terms interchangeably, and some inland marine forms label it contractors equipment and installation floater when the scope is narrower. What matters is not the label on the binder but the valuation basis, the perils covered, the sublimits, the deductible structure, and the defect exclusion wording inside the form.
What is a named windstorm deductible on a builders risk policy?
A named windstorm deductible is a percentage deductible that applies only when the loss is caused by a storm the National Hurricane Center has named. Typical 2026 commercial builders risk placements in Tier 1 coastal counties carry 2% to 5%, calculated against completed project value rather than the size of the loss. On a $20,000,000 project a 3% named storm deductible is $600,000 out of pocket before the policy pays one dollar. Hail and earthquake percentage deductibles work the same way.
Does builders risk cover soft costs and lost rent?
Only if you buy the soft costs and delay in start-up extension, and only for the categories you schedule. Base builders risk pays for physical damage to the work. It does not automatically pay the extended construction loan interest, additional architectural and engineering fees, re-permitting costs, extra legal and accounting expense, or the rent and pre-leased income you lose while the rebuild runs. Those are soft costs, and they need their own limit, their own waiting period in days, and a stated delay period.
What do LEG 1, LEG 2, and LEG 3 mean in a builders risk policy?
LEG stands for the London Engineering Group, and the LEG clauses set how far a defect exclusion reaches. LEG 1 is the broadest exclusion and knocks out all loss or damage arising from defective workmanship, materials, or design. LEG 2 excludes the cost that would have been incurred to fix the defect before it caused damage, but pays the resulting damage. LEG 3 is the most favorable to the insured and excludes only the cost of improving on the original design, material, or workmanship. Ask which clause is on your form before you sign, because the spread between LEG 1 and LEG 3 on a single structural defect claim can be seven figures.
Does builders risk cover theft of materials on site?
Most commercial builders risk forms cover theft of materials intended to become part of the completed work, but with conditions and often with a sublimit. Copper wire, switchgear, rooftop units, and staged insulated metal panels are the usual targets. Carriers commonly require reasonable site security, and many forms exclude theft where there is no visible sign of forced entry or where property was left unattended and unsecured. Mysterious disappearance and employee dishonesty are frequently excluded outright.
When does builders risk coverage end?
Coverage typically ends at the earliest of policy expiration, substantial completion, owner occupancy or beneficial use, or acceptance of the work. Occupancy is the trap. Move a tenant into phase one while phase two is still framing and you may terminate coverage on the entire project without knowing it. If your project is phased, get a written occupancy permission endorsement before anyone takes possession, and line up the permanent property policy so there is no gap on the day the builders risk switches off.
Do I still need builders risk on a renovation or tenant improvement?
Yes, and the structure is different. On a renovation you insure the value of the work being performed, while the existing building stays on the owner's permanent property policy. That split creates a seam. Confirm in writing whether the permanent property carrier has been notified of the construction, whether the vacancy or renovation clause has been endorsed away, and whether both policies contain matching waivers of subrogation. Uncoordinated renovation coverage is one of the most common sources of denied commercial construction claims.
Related guides for owners and developers
How delivery method changes who carries risk and who is expected to buy the property policy.
Structure, eligibility, and the insurance evidence the lender conditions funding on.
Current lead times that decide how long high value equipment sits in off-site storage.
Permit clocks by state, and what re-permitting after a casualty costs you in months.
The 2026 fall protection rules underwriters read as a proxy for site discipline.
Erection sequence and collapse exposure, the window where a builders risk claim is most likely.
Check what a construction loan will support before you size the policy and the deductible reserve.
Field control and documentation discipline when the owner holds the trade contracts directly.
Nationwide ground-up and renovation delivery, licensed in all 50 states.
Get the coverage questions answered before you mobilize
Thirty minutes with a builder who has read the binder is cheaper than the deductible you did not reserve.
Or start at the owner finance and advisory hub and let us build the risk register alongside the estimate.
Sources and further reading
American Institute of Architects and AIA Contract Documents for the A201 general conditions and the A101 agreement family. ConsensusDocs for the coalition-drafted alternative allocation. IRMI for construction risk reference material and builders risk commentary. Verisk, parent of the Insurance Services Office, for standard policy forms and rating information. National Association of Insurance Commissioners for state regulation and market conduct data. Surety and Fidelity Association of America for bond mechanics. Associated General Contractors of America and Design-Build Institute of America for contract and delivery practice. FM for property loss prevention data sheets and construction site fire protection guidance. NFPA for NFPA 241 safeguarding construction operations and NFPA 51B hot work. International Code Council for the code editions that drive ordinance or law exposure. NOAA National Centers for Environmental Information for billion dollar disaster loss records. FEMA for flood mapping and flood zone determinations. USGS for seismic hazard mapping. Insurance Institute for Business and Home Safety for hail and wind resilience research. National Insurance Crime Bureau for equipment and material theft data. Engineering News-Record and Construction Dive for market and cost index reporting. Bureau of Labor Statistics and U.S. Census Bureau for producer price and construction put-in-place data. ASTM International for materials and testing standards referenced in specifications. OSHA for construction safety standards that underwriters treat as a baseline.
