Why Skipping Insurance During Construction Is a Huge Risk

A lot of people think skipping insurance during construction is a clever way to save a few bucks. I get it—premiums feel like a line item you can control when everything else (lumber, labor, interest rates) seems out of your hands. But here’s the hard truth: every construction site is a magnet for risk. Weather, theft, accidents, design mistakes, you name it. I’ve seen clients lose six figures—and months of schedule—over things that a well-built insurance program could’ve covered in an afternoon. One custom home I consulted on lost an entire framed structure to a windstorm two days before roof sheathing. No builder’s risk. The owner had to borrow another $190,000 to rebuild and ate four months of carrying costs. That’s not a “maybe one day” problem. That’s Tuesday.

The hidden math of construction risk

Construction isn’t like normal property ownership. A house you live in has predictable risks. A house under construction is a half-finished puzzle exposed to weather, trades, tools, neighbors, and tight schedules. Risk multiplies when you have:

• Materials stored on-site or in transit
• Open structures (no roof yet, so rain is your enemy)
• Temporary utilities, heaters, and hot work
• Heavy equipment and traffic
• Multiple companies on the same site with overlapping responsibilities

Here’s the mental model: during construction, your downside is outsized relative to the budget you “saved” by skipping insurance. Think of a $900,000 build. A builder’s risk policy might cost $3,500–$11,000 depending on scope, location, and coverage. The cost of a single water intrusion event while the roof is open can be $50,000–$250,000, plus delay costs. Theft of copper and HVAC equipment can run $15,000–$40,000. A fire? That can zero out months of work. Insurance is about trading a known small number for protection against chaos.

What construction insurance actually covers (and what it doesn’t)

You don’t need “all the insurance” just because you’re building. You need the right types for your role and project. Here’s a clear breakdown.

Builder’s Risk (Course of Construction)

What it covers:

• The structure under construction, materials on-site, materials in transit, and sometimes materials stored off-site
• Temporary structures (fencing, scaffolding, forms)
• Damage from fire, wind, theft, vandalism, explosion, lightning, and often water (e.g., sudden storm intrusion)
• Optional “soft costs”: interest on loans, architectural/engineering fees, permits, legal, advertising, and other costs that increase due to a covered delay
• Debris removal, testing of building systems, and sometimes ordinance or law upgrades (if endorsed)

What it usually doesn’t cover without endorsements:

• Flood and earthquake (often excluded; can be added)
• Wear and tear, faulty workmanship (but sometimes it covers resulting damage)
• Employee theft
• Contractor’s tools and equipment (that’s inland marine)
• Existing structure during renovation (you need an “existing structure” endorsement)

Who buys it:

• Owners on custom homes and developer projects
• Occasionally the GC buys it and charges it as a job cost (clarify in the contract)

Cost ballpark:

• Roughly 0.3%–1.5% of completed project value for many residential/light commercial projects
• Example: $800,000 build = $2,400–$12,000 premium for 6–12 months, depending on location and options

Timeline tips:

• Bind before breaking ground; many carriers won’t backdate coverage
• Most policies can be quoted within 24–72 hours with a complete application and budget

Common mistakes:

• Naming the wrong insured (title owner should be named; add GC/trades as additional insureds as required)
• Not adding the “existing structure” during major renovations
• Underinsuring the completed value (claim hits co-insurance penalty)
• Forgetting soft-cost coverage—big problem during delays
• Letting coverage lapse at 90% completion while punch list and commissioning are still happening

Commercial General Liability (CGL)

What it covers:

• Third-party bodily injury and property damage caused by your operations
• Completed operations (claims arising after the job is done)
• Premises liability on the jobsite

What it doesn’t cover:

• Damage to “your work” due to faulty workmanship itself (this is a classic gap; CGL often covers resulting damage to other property)
• Professional errors in design (that’s E&O/professional liability)
• Employee injuries (that’s workers’ comp)

Who buys it:

• Every GC and subcontractor, without exception
• Owners don’t typically buy CGL for the project unless acting as an owner-builder

Cost ballpark:

• Small contractor: $600–$2,500/year for $1M per occurrence, depending on trade
• Medium-sized GC: $5,000–$50,000+/year based on revenue, payroll, and claims history

Contract must-haves:

• Additional insured status for the owner and GC on a primary and non-contributory basis
• Waiver of subrogation
• Completed operations coverage
• No residential exclusion (for residential contractors)

Workers’ Compensation

What it covers:

• Medical bills and lost wages for employee injuries on the job
• Shields the employer from most employee injury lawsuits

Who needs it:

• Any company with employees (rules vary by state; some require it even for one employee)
• Owner-builders who hire laborers are at risk if they treat them as “1099” without proper coverage; a misclassified injury can hit the owner directly

Cost ballpark:

• Charged per $100 of payroll, varies by trade and state
• Rough estimate ranges:
• Carpentry: $7–$20 per $100 payroll
• Roofing: $20–$45 per $100 payroll
• Electrical/Plumbing: $5–$15 per $100 payroll
• Experience mod and claims history swing rates dramatically

Professional Liability (Errors & Omissions)

What it covers:

• Financial losses resulting from design errors or professional advice
• Key if you’re design-build, a GC offering engineering-like services, or a trade doing design (e.g., HVAC design)

Cost ballpark:

• Small firms: $1,500–$6,000/year for $1M limits
• Medium firms: $5,000–$20,000+/year

Contractor’s Equipment and Tools (Inland Marine)

What it covers:

• Tools and equipment from theft, vandalism, and certain damages, often on and off-site and in transit
• Rented equipment can be scheduled; short-term rentals can be covered by a rented equipment endorsement

Cost ballpark:

• $300–$1,500/year for small tool schedules
• Large equipment fleets: varies widely, often in the tens of thousands annually

Commercial Auto and Hired/Non-Owned Auto

What it covers:

• Company vehicles and liability for at-fault accidents
• Hired and non-owned covers rented vehicles and employee-owned vehicles used for work

Cost ballpark:

• Highly variable by driver records, vehicle type, and geography

Pollution Liability (Contractor’s Pollution)

What it covers:

• Claims from accidental releases (fuel spills, asbestos disturbance, mold growth from improper drying)
• Government-mandated cleanup costs in some policies
• Often required for environmental trades, but helpful for GCs and restoration contractors

Cost ballpark:

• $3,000–$12,000/year for many contractors

Umbrella/Excess Liability

What it covers:

• Increases limits above CGL, auto, and employer’s liability
• Kicks in after underlying limits are exhausted

Cost ballpark:

• $500–$2,500+ per $1M in coverage, depending on risk class

Wrap-Up Programs (OCIP/CCIP)

What they are:

• Owner-Controlled Insurance Program or Contractor-Controlled Insurance Program
• One policy covering all parties on the job for CGL and sometimes workers’ comp and excess
• Helps avoid gaps, fights, and duplicate premiums

When used:

• Large projects (often $10M+)
• Condo towers, hospitals, schools, public works

Real-world scenarios: what goes wrong without insurance

I’ll walk you through common (and expensive) events I’ve seen or reviewed.

1) Wind takes down a framed structure

• Situation: Framing is up, sheathing not yet complete. A windstorm knocks down walls and damages materials.
• Cost: $75,000–$200,000 depending on size and extent; plus 2–6 weeks delay.
• With builder’s risk: Covered after deductible; soft costs (extended equipment rental, interest) may be covered if endorsed.
• Without it: Owner or GC pays out of pocket. Subs get paid again to redo work. Framer’s CGL typically doesn’t pay for damage to “your work.”

2) Water intrusion during roof replacement

• Situation: Crew removes old roof on a remodel. Unexpected storm hits overnight, tarps fail, water pours in.
• Cost: $50,000–$180,000 for drying, demo, and rebuild; longer if mold develops.
• With builder’s risk plus existing structure endorsement: Damage to the existing home is covered.
• Without proper coverage: Homeowner’s policy often denies or limits coverage during construction; contractor’s CGL fights the claim because it’s damage to the work in progress.

3) Theft of copper and condensers

• Situation: HVAC units and coils stolen over a weekend.
• Cost: $10,000–$30,000 plus delays.
• With builder’s risk (theft included): Covered if there’s evidence of forced entry and proper site security.
• Without it: Owner buys replacements; police report doesn’t equal reimbursement.

4) Trench collapse and neighbor damage

• Situation: Foundation excavation undermines neighbor’s driveway and fence.
• Cost: $30,000–$120,000 plus potential claims for loss of use.
• With CGL: Third-party property damage is covered.
• Without CGL: GC writes the check. If under a Fixed-price Contract, that might wipe out margin and more.

5) Worker injury on scaffolding

• Situation: Carpenter falls and fractures vertebrae.
• Cost: $150,000+ medical, rehab, lost wages; potential long-term disability.
• With workers’ comp: Covered; employer shielded from most lawsuits.
• Without workers’ comp: Catastrophic. Owner-builders can be pulled into suits if contractor is uninsured.

6) Fire from temporary heaters

• Situation: Cold-weather build, salamander heater tips.
• Cost: $100,000–$400,000 depending on spread.
• With builder’s risk: Covered; may need hot work/heat management compliance.
• Without it: Pure loss. GC and subs argue over responsibility for months.

7) Design error in beam sizing

• Situation: Engineer or design-build team undersizes a structural beam, discovered at inspection.
• Cost: $25,000–$100,000 to demolish and rework, plus delay.
• With professional liability: Covered for the design professional; may involve deductible and approval.
• Without it: Owner may try to recover from contractor; if no E&O, it becomes a legal fight.

8) Mold growth after a water event

• Situation: Wet materials not dried correctly; mold appears in walls weeks later.
• Cost: $20,000–$80,000 remediation plus rework.
• With pollution liability: Potential coverage if the cause ties back to operations.
• Without: Finger-pointing and out-of-pocket expenses.

9) Wildfire or hurricane hits mid-build

• Situation: Regional disaster damages or levels the site.
• Cost: Hundreds of thousands to millions.
• With builder’s risk: Covered perils; deductibles may be higher in catastrophe-prone areas; flood and named storm may require special endorsements.
• Without: You’re starting over with debt and no asset.

Renovations and owner-builders: special traps

Renovations introduce a sneaky gap: the “existing structure” vs. “work in progress” line. Many people assume a homeowner’s policy will cover a remodel. Often it won’t—or it will limit coverage severely—when the scope is substantial.

• Major remodels: If you’re removing the roof, moving load-bearing walls, or replacing major systems, standard homeowner’s policies may exclude or limit coverage. Ask your agent about a course-of-construction endorsement or a stand-alone builder’s risk policy with “existing structure” coverage.
• Owner-occupied during construction: Some policies reduce coverage if the home isn’t “habitable” during phases of construction. Confirm definitions. Document occupancy with photos and daily logs if it’s a gray area.
• Vacancy clauses: If the property is vacant beyond a specified period (commonly 30–60 days), certain coverages (vandalism, water damage) may be excluded. Builder’s risk avoids this issue.
• Condo/HOA projects: You’ll need to coordinate with the master policy; damage to common elements and neighbor units is a major exposure. Your contractor’s CGL must be rock-solid, and you’ll likely need additional insured status on their policy.
• Historic structures: Ordinance or law coverage becomes crucial. Bringing damaged portions up to current code can blow budgets without the right endorsement.
• Owner-builder hazards: Acting as GC without insurance is essentially betting your house. If a worker is hurt and the subcontractor lacks workers’ comp, you can be treated as the employer. Get a builder’s risk policy, require COIs, and consult an attorney on contracts.

Lenders, contracts, and permits: who requires what

• Lenders: Most construction loans require builder’s risk with the lender named as mortgagee/loss payee. Some also require GC CGL, workers’ comp, and even performance and payment bonds for larger projects. Failing to maintain insurance can violate your loan covenants.
• Municipalities: Permits often require proof of contractor licensing and insurance (CGL and workers’ comp). Public projects have strict requirements.
• Contracts: AIA and similar forms typically require builder’s risk provided by the owner, and specific CGL limits and endorsements for the GC and subs. Read the insurance section closely; modify it for your project.
• Developers and GCs: Often require subcontractors to carry specific limits and endorsements. If you don’t collect and audit COIs, you may inherit their risks.

The ROI: premium vs. potential loss

Let’s put real numbers to it.

Example: $1,000,000 custom home

• Builder’s risk premium: $4,500 (mid-range)
• Deductible: $5,000
• CGL and workers’ comp handled by GC and subs

Potential incidents in a 10–12 month build:

• Theft of materials: $18,000
• Storm damage to open framing: $80,000
• Water intrusion during roofing: $65,000
• Fire from temporary heat: $220,000
• Delay costs (interest, rent): $15,000–$60,000

The likelihood of at least one material loss event on an active site is not trivial. Even if you never file a claim, lender compliance and peace of mind justify the premium. If you file once, the policy probably paid for itself multiple times.

Step-by-step: how to properly insure your project

For homeowners (new build or major remodel)

1) Map your scope

• New build vs. renovation; value at completion; timeline; location risks (flood zone, wildfire, hurricane)
• Will you occupy the house during construction?

2) Decide who buys builder’s risk

• If you’re financing, the lender may require you to purchase it. If GC buys it, ensure you’re named insured.
• Include soft costs coverage if delays would trigger extra interest, rent, or design fees.

3) Fill the gaps for renovations

• Ask for “existing structure” coverage on builder’s risk. Confirm how much coverage applies to the old vs. new portions.
• Add ordinance or law coverage for code upgrades.

4) Coordinate with your homeowner’s policy

• Tell your agent about the project. Ask whether exclusions apply during construction.
• Consider increasing personal liability while many people are on-site.

5) Set contractor requirements

• GC must carry CGL ($1M/$2M or higher), workers’ comp, and auto. Ask for additional insured, primary/non-contributory, and waiver of subrogation endorsements.
• Require the GC to collect and verify COIs from all subs.

6) Confirm certificates correctly

• Your name spelled correctly, property address clearly listed, additional insured endorsements attached, policy dates covering your build window.

7) Document site security and weather plans

• Fencing, locks, lighting, cameras where feasible
• Tarping protocols, water shutoff procedures, temporary heat policies, and hot work permits

8) Revisit coverage at milestones

• As values increase, confirm the insured limit matches the latest budget
• Extend or adjust the policy if the schedule slips

For general contractors

1) Get your base program right

• CGL with completed operations; no residential exclusion if you do residential; proper classification of trades
• Workers’ comp with accurate payroll
• Tools and equipment coverage
• Commercial auto and umbrella if contractually required

2) Prequalify your subs

• Verify CGL with limits meeting contract, AI endorsements, workers’ comp active, and no critical exclusions (residential, roofing, foundation work, EIFS if applicable)
• Calendar renewals; don’t let certificates go stale mid-project

3) Clarify builder’s risk responsibilities

• If you buy it, charge it to the job and name the owner as named insured or loss payee as required
• Add soft costs and delay coverage if contract penalizes you for schedule slips

4) Tighten contract language

• Indemnity provisions aligned with state law
• AI and waiver of subrogation requirements in exact wording the carriers use
• Subcontractor default insurance or bonds for risky trades or large scopes

5) Implement a site risk plan

• Daily cleanup, lockboxes for copper and valuable items, fenced laydown areas
• Weather watch and pre-storm tie-downs and tarping
• Hot work permit system; fire watch procedures
• Water damage mitigation: cap risers, install temporary water alarms, assign a “last person out” checklist with shutoffs

6) Train your supervisors

• Claims hinge on documentation: photographs, daily logs, inspection reports, tarp and temporary roof logs, equipment checklists, tool inventory

For subcontractors

1) Carry the essentials

• CGL with completed ops; check that your work is correctly classified and not excluded
• Workers’ comp
• Inland marine for tools
• Auto if you or your crew drive for work

2) Get endorsements that win you jobs

• Blanket additional insured with primary/non-contributory
• Waiver of subrogation
• No residential limitation if you work on homes

3) Know your contract traps

• Indemnity obligations: don’t agree to insure others for their sole negligence
• Scope creep triggers: design responsibilities might drive a need for professional liability

4) Reduce claims on the ground

• Secure your materials, especially copper and packaged HVAC
• End-of-day walk-throughs for water sources and power tools

Vetting your contractor’s insurance: a quick field guide

Don’t accept a pretty certificate at face value. Check:

• Named insured matches the contracting entity on your agreement
• Policy dates cover the entire project timeline
• Limits meet the contract requirements
• Additional insured endorsements attached and specify ongoing and completed operations
• Primary/non-contributory wording and waiver of subrogation present
• No red-flag exclusions (residential classification issues; roofing exclusions for roofers; subs of subs exclusions)
• Workers’ comp active and in the correct state(s)

Pro tip: Call the agent listed on the certificate to verify. Ask for a copy of the endorsement forms, not just a box ticked on the ACORD certificate.

Common pitfalls and how to avoid them

• Assuming your homeowner’s policy covers construction: Often not for substantial renovations. Get a course-of-construction solution.
• Underinsuring the completed value: Carriers can penalize partial claims if you’re under the required percentage of actual completed value (co-insurance).
• Missing soft costs: If your project is financed or you’re renting during construction, add soft cost coverage.
• No existing structure coverage on remodels: This is the classic “we thought it was covered” problem.
• Not being listed as named insured: As the owner, you should be named so you have direct rights under the policy.
• Lapsed coverage near the finish line: Many losses occur during punch list and startup. Keep coverage active through completion and occupancy.
• Failing to require subcontractor insurance: If a sub injures someone or causes damage and isn’t insured, the claim climbs up to you.
• Not documenting security and weather procedures: Many theft/storm claims require proof of reasonable precautions.
• Unclear deductible responsibilities: Spell out in the contract who pays the deductible for a claim.

Risk management that actually reduces losses (and premiums)

Site security

• Fence and lockable gates for multi-week projects
• Motion lights and cameras if theft is common in your area
• Etch or mark serial numbers; keep a photographed inventory of tools and major materials
• Stage deliveries just in time for installation rather than storing them on-site for weeks

Water is the silent budget killer

• Cap plumbing stubs and temporarily isolate systems when crews leave
• Install inexpensive water detection sensors near risers and under temporary water heaters
• Don’t stockpile absorbent materials (drywall, OSB) in unprotected areas when rain is expected
• Use professional drying services promptly after any water incident; document moisture readings

Weather planning

• Follow local wind advisories; brace tall walls and trusses per manufacturer instructions
• When roof coverings come off, insist on professional-grade tarp systems and a same-day “button up” plan
• In wildfire zones, follow defensible space guidelines around the jobsite, even mid-construction

Hot work and temporary heat

• Require hot work permits for torching, welding, grinding; maintain fire watches afterward
• Keep temporary heaters clear of combustible materials; secure propane tanks; use CO detectors

Documentation

• Daily site photos, particularly before weather events and at end-of-day closeout
• Incident reports for near-misses; small leaks often foreshadow big losses
• Tool and material inventory logs, especially before weekends and holidays

Training and culture

• Toolbox talks on water control, hot work, ladder safety, and securing materials
• Encourage reporting issues early; a small roof leak caught today is not a mold remediation next month

Claims: what to do if something happens

Speed and documentation matter. Here’s a simple playbook I give clients.

1) Stabilize the site

• Safety first. Stop the hazard (shut water, secure electricity, cordon off areas)
• Prevent further damage (tarp, temporary shoring)

2) Document everything

• Photos and video from multiple angles; include context shots
• Save damaged components if safe; keep labels/serial numbers for stolen items

3) Notify your agent/carrier immediately

• Many policies require prompt notice; delays can complicate coverage
• Provide the who/what/when/where and a rough estimate if possible

4) Engage qualified vendors

• Insurance-friendly restorers, mitigation specialists, and structural engineers when needed
• Keep receipts and time logs; carriers will ask for them

5) Communicate with stakeholders

• Owner, GC, architect, lender. Scope the impact and initial plan
• If you have soft cost coverage, track delay days meticulously

6) Manage the repair scope

• Get adjuster approvals where required
• Keep change orders organized; avoid doing uninsured betterments unless strategic

7) Learn and adjust

• After any incident, update your site-specific risk plan. Prevent the sequel.

Typical timelines:

• Adjuster contact: 24–72 hours
• On-site inspection: 2–7 days depending on severity
• Initial payment on undisputed claims: 1–3 weeks
• Complex/major losses: months, especially with code upgrades or specialty materials

Costs, timeframes, and practical budgeting

• When to buy: 1–3 weeks before mobilization; some carriers won’t bind after work starts
• Policy term: Usually 6–15 months; extensions available for a fee
• Deductibles: $1,000–$10,000 typical; higher in catastrophe zones
• Flood and earthquake: Priced separately; may require specialized markets
• Premium financing: Common for larger premiums; spreads cost over the build

Budget tip for owners:

• Add an “insurance and risk” line to your project budget: builder’s risk premium + expected COI/endorsement fees + contingency for deductibles
• For a $1M project, $8,000–$15,000 total risk line is realistic in many markets (policy + endorsements + potential deductible exposure)

Budget tip for GCs:

• Schedule insurance costs into each estimate and show your client the value: premiums, endorsements, and administrative time verifying subs

Case snapshots with real numbers

1) Custom home, hillside lot, West Coast

• Event: Windstorm toppled framed walls before roof install
• Loss: $168,000 labor/material; $22,000 debris removal; 5-week delay
• Insurance: Builder’s risk paid $185,000 after $5,000 deductible; soft costs endorsed at $50,000 limit covered $14,600 interest/rent
• Key lesson: Tie-down and bracing logs mattered; adjuster commended documentation, speeding payment

2) Urban remodel, occupied home

• Event: Rain during roofing tear-off; tarps failed
• Loss: $94,000 interior damage; homeowner displaced for 3 weeks
• Insurance: Homeowner policy denied; GC’s CGL disputed “your work.” Existing structure endorsement on owner’s builder’s risk ultimately covered the majority after negotiation
• Key lesson: Without that endorsement, the owner would have been in litigation limbo for months

3) Multifamily mid-rise, large project with wrap-up

• Event: Copper theft over a holiday weekend
• Loss: $82,000 materials; $11,000 delay costs
• Insurance: OCIP builder’s risk covered; improved site lighting and security patrols reduced further incidents
• Key lesson: Stagger deliveries to reduce on-site inventory during vulnerable periods

4) Historic brownstone, structural redesign midstream

• Event: Discovered design error required beam upgrade and partial rework
• Loss: $74,000 rework cost; 2-week delay
• Insurance: Engineer’s professional liability paid after deductible
• Key lesson: For design-build teams, a clean E&O policy is worth every penny

5) Subcontractor fall, no workers’ comp

• Event: Framer fell from ladder; sub misclassified workers as 1099
• Loss: $280,000 medical and wage claims; litigation added six figures
• Insurance: Owner-builder dragged in, GC’s contract didn’t require proper proof of comp
• Key lesson: Verify workers’ comp certificates; ask for policy pages showing classification and state coverage

Practical checklists you can use tomorrow

Pre-construction insurance checklist (owner)

• Project value and timeline confirmed
• Builder’s risk bound with correct named insureds (you and lender), site address, and completed value
• Existing structure coverage if renovating
• Soft costs coverage limit adequate for your loan and rent exposure
• Ordinance or law coverage included
• Flood/earthquake considered based on location
• GC and key subs’ COIs reviewed; additional insured endorsements attached
• Contract specifies deductibles, responsibilities, and notice requirements
• Documentation plan in place (photos, logs)

Subcontractor verification checklist (GC/owner)

• CGL: $1M/$2M or per contract; no residential or trade-specific exclusions
• Additional insured endorsements covering ongoing and completed operations
• Primary/non-contributory and waiver of subrogation endorsements
• Workers’ comp active; correct states and classification
• Auto liability if vehicles used
• Umbrella if required
• Policy dates cover the whole project window
• Follow-up scheduled 30 days before any policy expiration during construction

Site risk controls (field)

• Perimeter fence with lockable gates
• Lockboxes and staged deliveries
• Water shutoff procedure and end-of-day checklist
• Hot work permit and fire watch
• Weather triggers and tarping standards
• Daily photos; incident and near-miss reports

Frequently asked questions I hear all the time

• Can my GC’s insurance cover me so I don’t need anything? Not for property under construction. The GC’s CGL covers third-party liability, not your half-built house. You need builder’s risk for the structure and materials.
• If it’s a small remodel, do I still need builder’s risk? If you’re doing surface-level work, maybe not. If you’re opening the building envelope, moving structure, or storing major materials, strongly consider it—especially the existing structure endorsement.
• What if the project goes longer than expected? Extend the policy before it expires. Carriers often allow extensions for a fee. Don’t let coverage lapse near completion.
• Who should be named insured? The property owner and sometimes the GC, depending on contract. At minimum, the owner and lender should have rights and be correctly listed (named insured or mortgagee/loss payee).
• Will filing a claim spike my premiums forever? A serious claim can affect pricing. But paying out of pocket for a six-figure loss hurts a lot more, especially with interest and schedule impacts.

A quick word on contract types and who eats losses

• Fixed-price contract: The GC bears more risk for cost overruns due to mistakes or certain delays; owner bears risk for disasters not covered by builder’s risk unless contract says otherwise. Clear insurance allocation is critical.
• Cost-plus: Owner often bears more risk of cost increases, but builder’s risk still protects the structure and materials. Define deductible responsibility and claim processes in writing.
• Design-build: Professional liability becomes central; confirm whose policy responds to design issues.

Special cases worth planning for

• Flood zones: Standard builder’s risk typically excludes flood. Obtain a separate flood policy for construction. Elevate materials and equipment above base flood elevation where possible.
• Earthquake regions: Purchase earthquake coverage; follow seismic bracing guidance strictly.
• Modular/prefab: Ensure coverage from factory to site; include transit and off-site storage coverage.
• Green building certifications: Rebuild requirements and re-commissioning after a loss can add costs; include soft costs and testing/commissioning coverage.

How to talk premiums down without gutting coverage

• Bundle with a carrier that knows construction; underwriters reward clean, documented risk controls
• Increase deductibles thoughtfully; don’t blow up your liquidity if a claim happens
• Demonstrate security (fencing, lighting, cameras), water mitigation plans, and weather protocols
• Keep a clean claims history by reporting quickly and mitigating losses aggressively
• For contractors: prequalify subs with strong insurance—losses often track to the weakest link

Why the “we’ll take our chances” argument doesn’t hold up

I hear this a lot when budgets are tight. It sounds logical—until you price the downside. The idea that you’ll “self-insure” a project implies you have the capital and appetite to write a six-figure check and absorb months of delays. Most owners and builders don’t. Even if you do, your lender might not allow it, and your client certainly won’t appreciate the risk. Insurance isn’t about fear. It’s about keeping a project alive when something uncontrollable happens.

A realistic way to proceed

If you’re planning a new build or a major renovation:

• Call your insurance broker as soon as you have a budget and a start date. Ask for a builder’s risk quote with options for soft costs, existing structure, flood/quake (if relevant), and ordinance or law coverage.
• Sit with your GC and align contracts to match the insurance: who buys builder’s risk, deductible responsibility, who’s listed as additional insured, and how you’ll handle a claim.
• Build site protocols that make your underwriter happy and your job safer: water shutoffs, tarping standards, documentation, security.
• Keep your lender in the loop. Send them the binder and ensure they’re properly listed on the policy.

You don’t buy construction insurance because you expect disaster. You buy it because you’ve built too much momentum and value to let one bad night, one fast storm, or one small mistake erase months of work. The premium is tiny compared to the time, cash, and stress you’ll spend trying to recover without it. As someone who’s sat at the table with owners, builders, and adjusters after “the thing” happens, I can tell you—having the right policy turns a catastrophe into a problem you can solve. Without it, you’re rolling the dice with your schedule, your budget, and sometimes your home itself.