Do Property Owners Need Builders Risk Insurance or Can Contractors Provide It?

Nate Jones, CPCU, ARM, CLCS, AU
1 day ago
2 min read

One of the most common questions during a construction or renovation project is who should carry builders risk insurance—the property owner or the contractor? The answer isn’t always straightforward, and misunderstanding responsibility can lead to costly coverage gaps.

Understanding how builders risk insurance works—and who should provide it—helps protect everyone involved in the project.

What Is Builders Risk Insurance?

Builders risk insurance is a temporary property insurance policy that protects a building while it is under construction or renovation. Coverage typically includes:

The structure under construction
Materials and supplies on-site or in transit
Damage from fire, wind, theft, or vandalism
Optional endorsements like flood, earthquake, or soft costs

The Insurance Information Institute explains that builders risk coverage is designed to protect the financial interest of parties involved in construction.

When Property Owners Typically Carry Builders Risk Insurance

In many cases, property owners purchase builders risk insurance, especially when:

The owner is financing the project
A lender requires coverage in the owner’s name
The owner wants direct control over limits and endorsements
The project involves significant materials or long timelines

Since the owner has the greatest financial interest in the completed property, insurers and lenders often prefer the policy be written in the owner’s name.

When Contractors May Provide Builders Risk Insurance

Some general contractors carry builders risk insurance as part of their project package. This may be appropriate when:

The construction contract specifies contractor-provided coverage
The project is smaller in scope or shorter in duration
The contractor is responsible for materials and workmanship

However, contractor-provided builders risk insurance may have lower limits or exclusions that don’t fully protect the property owner’s investment.

The National Association of Home Builders advises reviewing construction contracts carefully to understand insurance responsibilities.

Risks of Relying Solely on Contractor Coverage

Relying entirely on a contractor’s builders risk insurance can expose property owners to gaps, such as:

Coverage limits that don’t match full replacement cost
Exclusions for owner-supplied materials
Limited or no coverage for soft costs or delays
Unclear claim payment rights

If a loss occurs, disputes may arise over who receives claim payments and whether coverage is sufficient.

Best Practice: Clarify and Coordinate Coverage

In many projects, the safest approach is to:

Have the property owner carry builders risk insurance
Name contractors and lenders as additional insureds or loss payees
Require contractors to carry general liability and workers’ compensation coverage

This structure ensures the owner’s investment is protected while contractors handle liability exposures.

The National Association of Insurance Commissioners emphasizes clear insurance responsibility in construction agreements to avoid disputes.

How Wexford Insurance Helps Avoid Coverage Gaps

At Wexford Insurance, we help property owners and contractors determine who should carry builders risk insurance and how to structure it properly. We assist with: