Builder’s Risk Insurance in California | Contractor Guide 2025
Builder’s Risk Insurance: Complete Guide for Contractors in California
Introduction
Construction projects are filled with excitement, opportunity, and unfortunately—risks. Whether you’re a general contractor, subcontractor, or property owner, unexpected events like theft, fire, vandalism, or storm damage can cause serious financial setbacks. That’s where Builder’s Risk Insurance (also known as Course of Construction Insurance) comes in.
This specialized type of property insurance protects structures under construction, as well as the materials, equipment, and supplies essential to project completion. If you’re a California contractor, understanding how builder’s risk insurance works, what it covers, and why it’s different from general liability insurance is critical to keeping your business compliant and financially secure.
In this guide, we’ll explore everything you need to know about builder’s risk insurance in California, including costs, exclusions, and best practices for protecting your projects.
What Is Builder’s Risk Insurance?
Builder’s risk insurance is a temporary property insurance policy designed to cover buildings under construction, renovation, or installation. Unlike general liability insurance (which protects against third-party bodily injury or property damage), builder’s risk focuses specifically on the structure itself and the materials used in the project.
Think of it as protection for your job site. If a fire, theft, or vandalism damages your work in progress, this policy ensures that your financial investment doesn’t go to waste.
Who Needs Builder’s Risk Coverage?
Anyone with a financial interest in a construction project should consider builder’s risk insurance. This includes:
Property owners
General contractors
Subcontractors
Developers
Lenders
Architects and engineers (sometimes listed as insureds)
👉 For contractors, this policy is often required by lenders or project owners before work begins. It also works hand-in-hand with your contractor license bond and other coverages like general liability insurance【link to: https://budgetbonds.com/post/types-of-general-liability-insurance】.
What Does Builder’s Risk Insurance Cover?
Coverage varies by policy, but most builder’s risk plans protect against direct physical loss or damage to:
Buildings and structures under construction
Materials, fixtures, and equipment on-site, in storage, or in transit
Temporary structures (scaffolding, fencing, signage)
Debris removal after a loss
Valuable papers, blueprints, and electronic data
Common Perils Covered:
Fire and lightning
Theft and vandalism
Explosion
Windstorms and hail
Vehicle or aircraft damage
Some “Acts of God” like hurricanes (depending on policy extensions)
Soft Costs Coverage
Beyond direct damage, builder’s risk insurance may also cover indirect costs caused by project delays, such as:
Additional loan interest
Lost rental income
Penalties for late project delivery
Real estate taxes
👉 This makes builder’s risk especially important for larger projects, where delays can snowball into significant financial losses.
What’s Not Covered by Builder’s Risk Insurance?
Equally important is knowing what builder’s risk does not cover. Standard exclusions typically include:
Normal wear and tear
Employee theft
Faulty design, workmanship, or materials
Rust and corrosion
Mechanical breakdowns
War, terrorism, or government action
Floods and earthquakes (though endorsements may be available)
Contractor’s own tools and equipment (covered under Contractors Tools & Equipment Insurance【link: https://budgetbonds.com/post/contractors-tools-equipment-insurance】)
Employee injuries (covered by workers’ compensation insurance【link: https://budgetbonds.com/post/why-contractors-need-workers-compensation-coverage】)
📌 Pro Tip: Many contractors mistakenly assume builder’s risk covers liability claims from injuries or property damage. It doesn’t—that’s where general liability insurance comes in.
Builder’s Risk Insurance vs. General Liability Insurance
It’s common for contractors to confuse builder’s risk with general liability insurance. While both are essential, they serve different purposes:
Builder’s Risk → Protects the project itself (materials, structures, job site).
General Liability → Protects against third-party claims (injuries, property damage, advertising injury).
👉 Most contractors need both policies to fully protect their business.
You can read more about contractor liability coverage here:
Types of General Liability Insurance for Contractors
How Much Does Builder’s Risk Insurance Cost?
The cost of builder’s risk insurance depends on several factors:
Project Value: Coverage should equal the full completed value of the project (excluding land).
Type of Project: New builds vs. renovations (renovations usually cost more due to added risk).
Construction Materials: Wood-frame buildings carry higher risk than fire-resistant materials.
Project Location: Proximity to coastlines, flood zones, or wildfire-prone areas affects premiums.
Coverage Extensions: Adding earthquake, flood, or pollution cleanup increases costs.
General Rule of Thumb:
Builder’s risk insurance usually costs 1–4% of total construction value. For example, a $500,000 project might cost between $5,000 and $20,000 in premiums.
When Should You Purchase Builder’s Risk Insurance?
Coverage should be in place before construction begins or as soon as materials arrive on-site. Waiting until after work has started can limit your options and increase underwriting scrutiny.
Policies generally end when:
The project is complete
The building is occupied
The building is put to intended use
At that point, contractors transition to commercial property insurance or general liability coverage for ongoing protection.
Best Practices for Contractors in California
To avoid gaps in coverage and maximize protection:
Work with an experienced insurance provider that specializes in construction.
Review exclusions carefully—especially for flood, earthquake, and faulty workmanship.
Bundle your coverage with general liability, workers’ compensation, and contractor license bonds for efficiency.
Set reminders for renewal dates to avoid lapses that could delay your projects.
Communicate with lenders and project owners to ensure all stakeholders are named on the policy.
👉 Learn more about the bonding process for contractors in California here:
Bonding Process for Contractors
Why Builder’s Risk Insurance Matters in California
California contractors face unique risks: wildfires, earthquakes, floods, and a highly regulated construction industry. Builder’s risk insurance provides an essential safety net, protecting not just your project but also your business reputation and client relationships.
Pairing builder’s risk coverage with your contractor license bond and other policies ensures your projects stay on track—financially and legally.
Conclusion
Builder’s risk insurance isn’t just another construction expense—it’s a vital investment in protecting your work, your reputation, and your bottom line. Whether you’re breaking ground on a new commercial build, renovating a home, or installing high-value systems, this coverage ensures that unforeseen events don’t derail your project.
By securing the right policy, staying compliant with California CSLB requirements, and working with a trusted provider like Budget Bonds, you can focus on what you do best: building with confidence.
