Question 1

What is builder's risk insurance?

Accepted Answer

Builder's risk insurance (also called course of construction insurance) covers buildings and structures while they are under construction or renovation. It protects against physical loss or damage to the structure, materials on site, and sometimes materials in transit — from causes like fire, wind, vandalism, theft, and collapse. Builder's risk is a temporary policy tied to the construction period — it expires when the project is complete, typically when the certificate of occupancy is issued or the owner takes possession.

Question 2

What is commercial property insurance?

Accepted Answer

Commercial property insurance covers buildings and business personal property once they are completed and occupied. It covers physical loss or damage to your owned or leased building, equipment, inventory, and improvements from covered perils (fire, wind, water, theft, etc.). Commercial property is an ongoing policy — it renews annually and covers the building during normal business operations, not during construction.

Question 3

When does builder's risk end and commercial property begin?

Accepted Answer

The transition point is typically when the project reaches substantial completion — usually defined by the certificate of occupancy (CO) issuance or when the building owner takes possession and begins using the structure. At that point, builder's risk typically terminates and commercial property coverage needs to be in place. This transition is a critical coverage gap moment — if commercial property is not in place when builder's risk expires, the building is uninsured even if it's sitting completed but empty. Coordinate the policy transition well before the projected completion date.

Question 4

Who buys builder's risk insurance?

Accepted Answer

Builder's risk is typically purchased by whoever has the greatest financial interest in the project — most commonly the property owner or developer. However, general contractors may purchase it when required by contract, and some lenders require it as a loan condition. The policy should name all parties with an insurable interest: owner, GC, subcontractors, and the lender. Review your construction contract carefully — it should specify who is responsible for procuring builder's risk coverage.

Question 5

Does builder's risk cover contractor tools and equipment?

Accepted Answer

No. Builder's risk covers the structure being built and materials incorporated into it — not the contractor's own tools, equipment, and machinery. Contractor tools, scaffolding, equipment, and temporary structures need separate inland marine / contractors equipment coverage. Theft of contractor tools from a job site at night is the most common scenario where builders assume builder's risk covers their equipment — it does not. Each contractor should carry their own inland marine policy for tools and equipment.

Feature	Builder's Risk	Commercial Property
When active	During construction/renovation	After completion/occupancy
Policy duration	Temporary (project-based)	Annual, ongoing
Who typically buys	Owner/developer or GC	Building owner/business owner
Covers structure	✅ Yes (under construction)	✅ Yes (completed)
Covers materials on site	✅ Yes (materials + supplies)	⚠️ Business personal property only
Covers contractor tools	❌ No — separate inland marine	❌ No — separate inland marine
Covers business income	⚠️ Soft costs available	✅ Business income rider available
Covers completed building	❌ No — must transition to CP	✅ Yes
Cost (typical)	$0.01–$0.02 per $1 insured value/mo	$0.50–$2.00 per $100 value/year
Lender typically requires	✅ During construction	✅ Throughout loan term

Builder's Risk vs. Commercial Property Insurance: What's the Difference?

Side-by-Side Comparison

The Transition Gap: The Most Dangerous Moment in Construction Finance

⚠️ Critical Coverage Gap Warning

What Builder's Risk Actually Covers

✅ Covered

❌ Not Covered

Frequently Asked Questions

Frequently Asked Questions

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