Builders Risk Insurance

Builders risk insurance, also known as course of construction insurance, covers a building project against physical damage during the construction or renovation period. For apartment owners, this applies to new construction of apartment buildings, major renovation or rehabilitation of existing buildings, and significant additions to existing structures.

The policy covers the structure under construction, building materials and supplies on-site or in transit, temporary structures such as scaffolding, and installed fixtures and equipment. Covered perils typically include fire, lightning, windstorms, hail, theft, vandalism, and certain types of water damage. The coverage amount increases as construction progresses and more value is added to the project.

Builders risk policies are designed to be temporary, lasting for the duration of the construction project. Once the project is completed and a certificate of occupancy is issued, the builders risk policy ends, and the building transitions to a permanent commercial property policy. Most policies can be extended if the project timeline is delayed.

During construction, an apartment building is uniquely vulnerable. The structure is open to the elements, combustible materials are present throughout the site, and security is more difficult to maintain than in a completed and occupied building. Fire, theft of materials, storm damage, and vandalism are all common risks at construction sites.

Standard commercial property insurance does not cover buildings under construction. The property policy is designed for completed, operational buildings, and its terms and conditions do not account for the specific risks of a construction environment. Without builders risk coverage, the apartment owner, developer, or general contractor bears the full financial risk of any damage to the project.

The financial stakes are high. A fire at an apartment construction site can destroy millions of dollars in work and materials, and the project delays add further financial impact through extended loan interest, delayed rental income, and contractor rescheduling costs. Builders risk insurance protects the investment throughout the most vulnerable phase of the project.