How to Respond to Common Objections for Builder’s Risk Insurance


Builder’s Risk insurance provides coverage for buildings and structures while under construction, renovation, or remodeling. The policy, written for a specific time frame (3, 6, 9, or 12 months), is designed to protect against various risks that can occur during the construction process. It typically covers the following:

  • Property Damage to Insured Structure & Materials: This includes damage from fire, lightning, wind, theft, and vandalism.
  • Materials in Transit: Coverage may extend to building materials and equipment in transit to the construction site.
  • Debris Removal: The cost of removing debris resulting from a covered loss is often included in the policy.

A Builder’s Risk policy can also be designed to cover soft costs related to construction delays from a covered loss, such as architectural and engineering fees, permits, and other project-related expenses.

Once construction or renovation is completed, a Builder’s Risk policy is no longer needed, and other types of insurance, such as Commercial Property or Homeowners insurance, should step in to insure the property.

Why Should Contractors Purchase a Builder’s Risk Policy?

Contractors should buy a Builder’s Risk policy for a number of reasons, including:

  • Construction projects involve substantial investments in materials, labor, and equipment. The financial impact on the contractor could be significant if an unforeseen catastrophe causes damage or loss during the construction process. Builder’s Risk insurance helps contractors retain financial stability by covering repair or replacement costs, allowing them to recover more rapidly.
  • Builder’s Risk insurance is typically required in contract agreements with property owners, lenders, or other stakeholders. Compliance with such contractual duties is crucial in obtaining a project, maintaining excellent client relationships, and ensuring the project runs smoothly.
  • Construction projects are frequently carried out with a set budget and timetable in mind. Any unanticipated loss or delay might impact the contractor’s profitability. Builder’s Risk insurance safeguards against these financial losses, assisting the contractor in keeping the project financially viable.

Why Wouldn’t a Contractor Buy Builder’s Risk Insurance, and How Should You Respond to Their Objections?

The policy will add to the cost of my project.

Emphasize that, while a premium is associated with Builder’s Risk insurance, the potential financial impact of not having coverage in the event of a loss is far greater. Highlight the long-term cost savings and protection against significant financial losses to help justify the expense.

I don’t really need the coverage.

Provide concrete examples of potential risks and losses that could occur during construction, such as fire, theft, vandalism, or natural disasters. Explain how Builder’s Risk insurance specifically addresses these risks and offers tailored protection during the construction phase. In addition, explain that a contractor’s General Liability or Property policy will not cover losses for properties under construction or renovation.

The subcontractor or property owner already has coverage.

Make clear that Builder’s Risk insurance is typically the responsibility of the party in control of the construction site, which is often the general contractor. Stress the importance of having control over the insurance coverage to ensure that the contractor’s interests are adequately protected.

It’s a short-term project, so the risk is minimal.

Even short-term projects are exposed to various risks, and a single unforeseen event can have a substantial impact. Builder’s Risk insurance provides targeted coverage for the project’s duration, offering protection during this vulnerable construction phase.

My contract with the owner doesn’t require Builder’s Risk insurance.

Stress the importance of proactively managing risk and protecting the contractor’s financial interests. Even if a contract doesn’t explicitly require Builder’s Risk insurance, having the coverage can demonstrate professionalism and responsibility, potentially leading to more favorable terms in future contracts.

In addressing these objections and communicating the benefits of Builder’s Risk insurance, you can help your clients can make more informed decisions about risk management, protecting their projects and financial interests.


*NOTE: The insuring agreement in a policy sets out the covered perils, assumed risks, and nature of coverage that the insurance company provides to its insured in exchange for the premiums paid. Thus, the terms and conditions of the policy will dictate whether coverage exists and the nature of any potential benefits.