Builder's Risk Insurance

What Is Builder's Risk Insurance?

Builder's risk insurance is a specialized property insurance policy that protects buildings and structures while they're under construction or renovation. Unlike standard commercial property insurance, which covers completed buildings, this coverage is designed specifically for projects in progress. Hatoway Insurance's agents help contractors, developers, and property owners find the right protection for their construction projects.

This coverage typically protects the structure itself, materials on-site or in transit, temporary structures, and equipment used in construction. The policy remains active from the moment construction begins until the project is complete or the building is occupied. Once construction finishes, you'll transition to a standard commercial property policy.

Builder's risk insurance is often called course of construction insurance because it covers the building during its construction course. Most construction lenders require this coverage before they'll fund a project. Even when it's not required, smart contractors and developers use it to protect their investment from unexpected losses that could derail a project or cause significant financial hardship.

What Does Builder's Risk Insurance Cover?

Builder's risk coverage protects your construction project from a wide range of perils. Understanding what's covered helps you make informed decisions about your policy limits and any additional coverage you might need.

Standard covered perils typically include:

• Fire, lightning, and explosion damage to the structure or materials
• Wind and hail damage during construction
• Theft of building materials, fixtures, and equipment from the job site
• Vandalism and malicious mischief
• Collapse of the structure during construction
• Water damage from burst pipes or rain entering through openings
• Damage to materials while in transit to the job site
• Temporary structures used during construction

Soft costs coverage is an important addition that many developers choose. This protects you from financial losses if construction delays extend your project timeline. Soft costs can include extended loan interest, additional architect and engineer fees, property taxes during the delay, and advertising costs if you need to re-lease or re-market the property. These expenses add up quickly when a covered loss stops work on your project.

What's typically excluded:

• Flood damage (requires separate flood insurance)
• Earthquake damage (requires separate earthquake coverage)
• Employee theft or dishonesty
• Faulty workmanship or design errors
• Normal wear and tear
• Mechanical breakdown of equipment
• Losses after the building is occupied or the project is complete

Some exclusions can be added back through endorsements. Your policy can be customized based on your specific project risks, location, and construction type. We help you identify gaps in coverage before they become problems.

How Much Does Builder's Risk Insurance Cost?

Builder's risk insurance costs vary significantly based on several factors related to your specific construction project. There's no one-size-fits-all price because every project has unique characteristics that affect risk.

Project value is the primary pricing factor. Your policy limit should equal the completed value of the structure, not including the land cost. Higher project values mean higher premiums because there's more at risk. Make sure you don't underinsure—if you set your limit too low, you could face a coinsurance penalty at claim time.

Construction type significantly impacts your cost. Frame construction typically costs more to insure than fire-resistant materials like concrete and steel. Renovations of occupied buildings may cost more than new construction because of the increased risk to existing structures and occupants. Projects involving hazardous materials or complex construction techniques will also see higher premiums.

Project duration affects pricing because longer projects have more exposure to potential losses. A six-month project will cost less than a two-year project of similar value. Some insurers offer monthly policies, while others provide coverage for the entire construction period with one upfront premium.

Location matters because some areas have higher risks. Coastal regions face hurricane exposure, certain areas have higher theft rates, and locations prone to severe weather will see higher premiums. Your job site security measures can also impact cost—fenced sites with security systems typically cost less to insure than open, unsecured locations.

Deductible choices give you control over your premium. Higher deductibles reduce your upfront cost but mean you'll pay more out of pocket if you file a claim. Many contractors choose deductibles between $1,000 and $10,000 depending on their risk tolerance and project budget.

As an independent agency, we shop multiple carriers to find competitive rates for your project. We'll help you balance coverage needs with budget constraints to get the protection you need at a price that works.

Do I Need Builder's Risk Insurance?

If you're involved in construction, you probably need builder's risk insurance. Several situations make this coverage essential rather than optional.

Construction lenders almost always require it. If you're financing your project through a bank or construction loan, the lender will mandate builder's risk insurance to protect their investment. They want assurance that if something happens during construction, there's coverage to repair or rebuild so the project can be completed and the loan repaid.

General contractors benefit from builder's risk because it protects their work in progress. If you're building a structure for a client, this coverage protects you from losses during construction. Without it, you could be responsible for replacing stolen materials, repairing storm damage, or rebuilding after a fire—costs that could easily exceed your profit margin or even bankrupt your business.

Property developers and owners who are building for their own use or for sale need this protection. You're investing significant capital in a project that's vulnerable to numerous risks during construction. Builder's risk insurance ensures that a covered loss won't drain your resources or leave you with an unfinished building you can't afford to complete.

Renovation projects need coverage too. If you're doing a major renovation or addition, standard property insurance may not adequately cover materials and work in progress. Builder's risk fills this gap, protecting both the existing structure and the renovation work.

Subcontractors should verify coverage. While the general contractor or property owner typically purchases the builder's risk policy, make sure you're listed as an additional insured. This protects your materials and work on the project. If the project doesn't have builder's risk coverage, you may need to purchase your own installation floater policy.

Even when not required, builder's risk insurance makes financial sense. Construction sites face numerous risks—theft, weather damage, vandalism, and accidents. One significant loss without insurance could cost more than years of premiums. The peace of mind knowing your project is protected lets you focus on completing quality work on time and on budget.

How to Get Builder's Risk Insurance in Indiana

Getting builder's risk insurance in Indiana starts with understanding your project requirements and finding an insurance partner who specializes in construction coverage. Indiana construction projects face specific risks from severe weather, including tornadoes, hail, and winter storms that can damage work in progress.

Start by gathering key project information. You'll need the total completed value of the structure (excluding land), the construction start and end dates, the project address, details about construction type and materials, and information about job site security measures. If you're financing the project, your lender will have specific coverage requirements you'll need to meet.

Indiana doesn't require builder's risk insurance by law, but lenders almost always mandate it for financed projects. Your policy should meet their requirements, including naming them as a loss payee and maintaining coverage throughout the construction period. Some Indiana municipalities may have specific requirements for commercial construction projects, so check local building codes and permit requirements.

Working with an independent insurance agency gives you access to multiple insurance carriers. We shop your project with different insurers to find the best combination of coverage and price. Not all insurance companies write builder's risk coverage, and those that do have different appetites for project types, sizes, and locations. Our relationships with multiple carriers mean we can find coverage even for challenging projects.

Consider add-ons that make sense for Indiana construction. Soft costs coverage protects you if covered delays extend your timeline. Wind and hail coverage is crucial given Indiana's severe weather patterns. If your project is in a flood-prone area near rivers or streams, separate flood insurance may be necessary since standard builder's risk policies exclude flood damage.

Review your coverage periodically as construction progresses. If the project scope changes or you add value through upgrades, you may need to increase your policy limit. If construction takes longer than expected, contact us before your policy expires to arrange an extension. Don't let your coverage lapse during active construction—this leaves you completely unprotected.

Since 1984, we've helped Indiana contractors, developers, and property owners protect their construction projects. We understand the unique challenges of building in Indiana and can guide you through the coverage decisions that matter most for your project.

Get Your Free Builder's Risk Insurance Quote

Protecting your construction project starts with the right insurance coverage. Don't wait until after a loss to discover you needed better protection. We'll review your project details, explain your coverage options, and provide quotes from multiple carriers so you can make an informed decision.

Our process is straightforward. Share your project information with us, and we'll prepare customized quotes that meet your coverage needs and budget. We'll explain the differences between policies, help you choose appropriate limits and deductibles, and answer all your questions about builder's risk insurance.

As an independent agency, we work for you, not the insurance companies. We'll advocate for your interests, help you understand policy terms, and be there when you need to file a claim. Our experience with construction insurance means we know what coverage you need and what you can safely skip.

Ready to protect your construction project? Contact our team today for a free builder's risk insurance quote. We'll shop multiple carriers to find you the right coverage at a competitive price. Let us show you why Indiana contractors and developers have trusted us for decades.