Is builder’s risk insurance right for me?

Standard home insurance won’t cover damages that befall a house under construction. Here’s a brief guide to the policy you do need.
Construction sites are notoriously susceptible to fires, vandalism and theft. But since they don’t represent fully finished and occupied homes, they can’t be insured as such. Builder’s risk insurance (BRI), sometimes called “course of construction,” is the conventional way to indemnify against loss on any unfinished building.
Who’s responsible to secure the policy?
While a BRI typically covers several named parties, like homeowner, contractor, architect and consultants, it falls upon one of them to arrange the policy in the first place. Ultimately the project owner is responsible, although in most cases the standard contract between a client and a builder stipulates that securing BRI is up to the latter. In that case, the builder is further compelled to inform the client of the exact nature of the coverage, with a clear expression of items covered and potential deductible costs, which may not exceed legally established limits. It’s up to the client to ensure that the builder is conforming to the terms required by the contract, and that they are suitable for the scope and expense of the project.
What’s covered?
It’s important to understand that the terms of each BRI policy vary significantly, depending on what’s been negotiated, and it’s incumbent upon the prospective building owner to ensure that appropriate replacement values and adequate coverage are present in the document. (The limit of insurability being the estimated value of the completed structure, plus costs for debris removal.) Typically, BRI covers “direct physical loss” due to accidents, theft or vandalism, whether they occur onsite, during transport or in offsite storage areas. It also covers damage due to certain acts of nature, such as wind events and lightning.
What’s excluded from coverage?
Like ordinary property insurance, there are usually coverage exceptions to extraordinary events like earthquakes, hurricanes, tornadoes and acts of war. BRI also won't cover any losses due to builder/design error, shoddy workmanship or materials, nor negligence on the part of any of the named insured. And if construction delays arise, BRI does not cover loss of income due to the building not being occupiable at a specific date. That, however, can be covered by a separate policy, or in a supplemental endorsement form on the original agreement.
Talk to your broker first
Because BRI is so intimately connected to the particular size and purpose of a building, its policies require more careful negotiation than most other insurance products. For this reason you should first interview several experienced contractors for their wisdom in this area. Only then should you contact an insurance broker who can translate that wisdom into the right policy for your building project.