What does builders risk insurance cover—and what should Texas owners and contractors check?

By Mark Melliand, owner, Melliand Insurance Agency · 13 years as an independent agent · Published October 28, 2026

The short answer

Builders risk insurance is property insurance for a building while it is being built or, under some policies, renovated. The Hartford describes it as covering damage to the building, materials and equipment during construction.

Builders risk policies vary. Standard forms exist, but insurers also use their own forms and endorsements, so coverage should not be assumed from the policy’s name. What a policy pays depends on:

  • the project it describes
  • the property it covers
  • whose interests are insured
  • the causes of loss it covers
  • its exclusions
  • its limits and deductibles
  • its endorsements

This guide explains what to review. It doesn’t predict how any claim will be decided or interpret your construction contract.

The forms we reviewed

To show how policy wording works, we reviewed two standard forms published by insurers:

We reviewed these two specimens separately. They are different editions from different sources, and they aren’t presented as the components of an actual policy. Both are illustrative examples only. The builders risk form is a 1995 edition. Neither is confirmed as the form, edition or endorsements in any current Texas policy. Insurer product features mentioned below are attributed to that insurer and aren’t universal.

New construction vs. renovation

The reviewed ISO builders risk form covers the “Building under Construction,” meaning “the building or structure described in the Declarations while in the course of construction.” It doesn’t describe coverage for an existing structure being renovated.

Insurers do write renovation projects:

  • The Hartford’s builder’s risk product snapshot lists renovations and additions alongside new construction.
  • Travelers lists the structure being built or renovated among the property its builders’ risk coverage protects.
  • The Hartford also describes extensions that can help protect adjacent property or existing structures next to a project.

Don’t assume that insuring the renovation work automatically insures the existing building. Ask:

  • Is the existing structure insured under the builders risk policy, under the owner’s property policy, or both?
  • What value applies to each?
  • Does either policy change once construction starts?

For the owner’s ongoing property coverage, see our guide to commercial property insurance coverage in Texas.

What property may be covered

Under the reviewed ISO builders risk form, covered property includes:

  • the building under construction, including its foundations
  • fixtures and machinery, equipment used to service the building, and “your building materials and supplies used for construction,” if that property is intended to be permanently located in or on the building, or within 100 feet of its premises
  • if not covered by other insurance, temporary structures built or assembled on site, such as scaffolding and construction forms

The form excludes land and water, and certain property outside of buildings, such as lawns, trees and shrubs. It gives a limited extension for sod, trees, shrubs and plants for specified causes of loss.

Travelers says its builders’ risk coverage can include equipment awaiting installation or already installed during construction, and reasonable labor costs, overhead and profit for the project. These are Travelers features, so check whether your policy includes them.

Materials in transit, temporary storage and property of others

  • Transit. Travelers says its coverage can include materials on site or in transit to the site. The reviewed ISO builders risk form focuses on property at the described premises. It changes the limit of the special form’s property-in-transit extension rather than providing broad transit coverage. Ask whether your policy covers materials in transit and at what limit.
  • Temporary storage. Planned off-site storage is different from moving property in an emergency. The reviewed builders risk specimen also has a limited preservation-of-property provision for necessary moves to protect covered property from a covered cause of loss. That provision does not establish general coverage for planned off-site storage. Ask whether off-site storage locations are covered, and under what conditions.
  • Property of others. The reviewed ISO builders risk form lets you extend coverage to building materials and supplies owned by others that are in your care, custody or control, on or within 100 feet of the site, and intended to become a permanent part of the building. The extension has a modest default limit unless the declarations show a higher one, and any payment for others’ property is “for the account of the owner of the property.”
  • Our inland marine guide covers contractors’ tools and installation coverage.

Owners, contractors, subcontractors and lenders

Several parties may have a financial interest in a project. Who buys the policy and who is actually insured aren’t always the same.

  • The named insured. The reviewed ISO builders risk form insures “you,” the named insured shown in the declarations.
  • Lenders. The same form includes a mortgageholders condition. It pays covered building losses to each mortgageholder shown in the declarations, “as interests may appear,” and gives mortgageholders certain rights if the named insured’s claim is denied.
  • Other parties. The Hartford says builders risk matters for business owners, general contractors and subcontractors. The reviewed sources don’t establish whether a particular owner, contractor or subcontractor is insured under a given policy.

Ask:

  • Who is the named insured?
  • Are other parties added as insureds, and for which property?
  • Is a lender listed?
  • Who is responsible for deductibles?

A construction contract may assign the responsibility to buy builders risk. What a contract requires is a legal question, so review it with your attorney.

Theft, vandalism, fire, wind and water

The reviewed ISO builders risk form doesn’t list covered causes of loss itself. It refers to the causes of loss form shown in the declarations, so coverage depends on which causes of loss form and endorsements apply.

The Hartford lists fire, theft, vandalism and hail among the risks builders risk can help protect against, along with natural events such as hurricanes or wildfires, depending on the policy.

Theft of materials needs specific review. The illustrative special form CP 10 30 09 17 limits coverage for building materials and supplies not attached as part of the building, when the loss is caused by or results from theft. Ask:

  • How does your policy treat theft of unattached materials and equipment on site?
  • Are there security conditions, such as fencing, lighting, locked storage or alarm requirements, that apply?

Water damage depends on the source and the policy wording. Ask how the policy treats rain entering an unfinished structure, plumbing discharges and surface water.

Flood, earth movement and coastal wind

  • Flood and earth movement. The Texas Department of Insurance says most commercial property policies exclude flood and earth movement. The Hartford’s builder’s risk product snapshot lists earthquake and earth movement, and flood and wind (coastal and non-coastal), among additional coverage options, and notes that coverages vary by state. Ask whether your policy includes these, or whether separate coverage is needed.
  • NFIP and buildings under construction. The NFIP General Property Form addresses buildings under construction, with specific conditions. See our guide to what commercial flood insurance covers.
  • Coastal wind. Projects on the Texas coast need separate review of wind and hail coverage. Our commercial property guide discusses the Texas Windstorm Insurance Association.

Faulty design, workmanship and materials

The Hartford says most builders risk policies don’t pay to repair or replace defective materials, workmanship or design.

The illustrative special form CP 10 30 09 17 excludes loss caused by faulty, inadequate or defective:

  • planning, zoning, development, surveying or siting
  • design, specifications, workmanship, repair, construction, renovation, remodeling, grading or compaction
  • materials used in repair, construction, renovation or remodeling
  • maintenance

The same form adds: “But if an excluded cause of loss that is listed in 3.a. through 3.c. results in a Covered Cause of Loss, we will pay for the loss or damage caused by that Covered Cause of Loss.”

The reviewed special form excludes loss caused by specified faulty, inadequate or defective work, materials and other listed causes, but preserves coverage for damage caused by a resulting Covered Cause of Loss. Whether particular repair costs fall within that wording requires review of the damage, exclusions and endorsements.

Some insurers offer broader options. Liberty Mutual says faulty workmanship coverage is available by endorsement. Ask how your policy treats defective work and resulting damage.

Testing, commissioning and protective safeguards

Testing equipment and systems can create its own risks. The Hartford’s builder’s risk product snapshot lists cold testing, including mechanical breakdown, and an optional hot testing extension. Liberty Mutual says hot testing options are available by endorsement. These are insurer-specific features. Ask whether your policy covers testing or commissioning, what kinds of testing are included, and under what conditions.

The reviewed sources don’t describe specific protective-safeguard or security conditions. Ask whether your policy includes any, such as fire protection, fencing, watch service or alarm requirements, and what happens if they aren’t maintained.

Project values, valuation, limits and deductibles

  • Completed value. The reviewed ISO builders risk form includes a “Need for Adequate Insurance” condition. It won’t pay a greater share of any loss than the proportion that the limit of insurance bears to the building’s value “on the date of completion.” Ask how your policy sets the limit, and what happens if the project value changes through change orders.
  • Valuation. The reviewed 1995 ISO form values covered property at actual cash value as of the time of loss. Other forms and editions may value property differently, so check your policy’s valuation clause.
  • Limits and deductibles. Ask which limits and deductibles apply, including any separate deductibles or sublimits for theft, wind, flood or earth movement.
  • Reporting. Some policies use reporting or premium-adjustment provisions. The reviewed sources don’t describe them, so ask whether your policy requires value reports.

Soft costs, delayed completion and lost rental income

A physical loss can delay a project and create costs beyond repairs, such as extra interest, permit fees, professional fees or lost rental income. The reviewed ISO form doesn’t include these coverages. Insurers describe options:

  • The Hartford describes soft costs coverage as helping with expenses beyond labor and materials when a project is delayed, and notes that this extension may include time-based deductibles.
  • The Hartford’s builder’s risk product snapshot lists soft costs and time elements among additional coverage options.
  • Travelers says its coverage typically extends to other project expenses that would have to be paid after a loss, such as building permit fees.

The Hartford also notes that most builders risk policies exclude consequential losses. Each of these coverages requires applicable wording and conditions. Ask whether your policy includes soft costs, delay in completion or rental income, and what waiting periods or time deductibles apply. See our guide to business income and interruption insurance.

When coverage begins and ends

Coverage starts and ends according to the policy. Under the reviewed ISO builders risk form, coverage ends when the first of these occurs:

  • the policy expires or is cancelled
  • the property is accepted by the purchaser
  • your interest in the property ceases
  • you abandon the construction with no intention to complete it
  • unless the insurer specifies otherwise in writing, a set number of days after construction is complete, or after the building is occupied in whole or in part or put to its intended use

These are one form’s termination events, not universal rules. Liberty Mutual, for example, says occupancy is included in its builder’s risk product. That is an insurer-specific feature, and its conditions require review.

Ask when coverage starts, what ends it, how partial occupancy affects coverage, and when permanent property coverage must be in place.

Extensions and changes in occupancy or use

Project extensions aren’t automatic. If a project runs past the policy’s expiration, or the building will be occupied or used before completion, ask the insurer in advance whether coverage can be extended or changed, and get any change in writing. Arrange permanent commercial property coverage before builders risk coverage ends.

How builders risk differs from other coverage

  • General liability. The Hartford explains that general liability addresses claims by others for bodily injury, property damage and advertising injury, while builders risk covers the project itself. See our guide to what general liability insurance covers.
  • Workers’ compensation. The Hartford notes that workers’ compensation, not builders risk or general liability, covers employees’ work-related injuries or illnesses.
  • Contractors’ equipment. Tools and equipment a contractor owns and moves between jobs are typically insured under contractors’ equipment coverage, not builders risk. See our inland marine insurance guide.
  • Installation coverage. The Hartford describes installation coverage as tied to the particular installation, while builders risk may cover an entire building project.
  • Permanent commercial property. Builders risk generally ends at or after completion. The building’s ongoing coverage then needs to be in place under a commercial property policy.

Comparison: project, coverage and questions

Project or exposureCoverage to reviewQuestions to ask
New building under constructionBuilders risk building and materials coverageIs the limit based on completed value? How does the policy handle change orders?
Renovation of an existing buildingBuilders risk renovation terms; owner’s property policyWhich policy covers the existing structure, and which covers the new work?
Materials on site, in transit or in storageCovered property, transit and storage provisionsAre materials covered off site and in transit? What limits apply?
Others’ materials in your careProperty-of-others extension; contractsWhat limit applies, and who is paid?
Theft or vandalismCauses of loss form; theft limitations; security conditionsHow is theft of unattached materials treated? What security is required?
Flood, earth movement or coastal windPolicy exclusions; optional coverages; separate flood or wind policiesAre these covered, excluded or available separately?
Defective workFaulty workmanship exclusion and resulting-loss wordingWhat happens if defective work leads to other damage?
Delay after a lossSoft costs, delay in completion and rental income, if includedWhich costs are covered, and what waiting period or time deductible applies?
Completion, occupancy or a schedule slipTermination provisions; extensions; permanent property coverageWhat ends coverage, and how is an extension requested?

Three examples to talk through

These hypothetical examples are for discussion only. Coverage depends on the facts and the actual policy language.

1. Materials are stolen from a construction site

Copper wire and fixtures waiting to be installed are taken overnight. Questions to review:

  • Were the materials attached to the building or still loose?
  • How does the policy treat theft of unattached materials?
  • Were any security conditions in place and met?
  • Who owned the materials, and are others’ materials covered?
  • Which deductible applies?

2. A renovation loss damages new work and the existing building

A fire during a renovation damages both new framing and the original structure. Questions to review:

  • Which policy covers the existing building, and which covers the new work?
  • What values and limits apply to each?
  • Do the two policies coordinate, and which applies first?

3. A covered physical loss delays completion and creates extra expenses

A covered loss pushes back a project’s completion, adding interest, fees and lost rental income. Questions to review:

  • Does the policy include soft costs, delay in completion or rental income coverage?
  • What waiting period or time deductible applies?
  • Which specific expenses are covered, and what documentation is needed?

Checklist before you review builders risk coverage

  • Project address, scope and construction type
  • New construction or renovation, including details about any existing building
  • Project values and how they were determined, including expected change orders
  • Start date, expected completion and current stage
  • Occupancy during construction
  • Parties involved and the insurance responsibilities in each contract
  • Materials in transit or stored off site
  • Site security and protective measures
  • Financing requirements and potential delay-related expenses
  • Existing property, liability, inland marine, flood and wind policies and endorsements

Sources

About Melliand Insurance Agency

Melliand Insurance Agency is an independently operated insurance agency affiliated with Premier Group Insurance (PGI), a nationwide agency network.

If you’d like help reviewing builders risk coverage for a project, call (972) 346-4666 or email melliandinsurance@gmail.com, Monday–Friday, 8 AM–5 PM Central.

This article provides general information only. It is not legal advice, does not interpret any construction contract, and is not a statement of coverage under any policy. Coverage depends on the actual policy forms, endorsements, declarations and the facts of a loss. The forms described here are illustrative examples identified by form and edition. They are not confirmed current Texas policy terms, and builders risk policies often use insurers’ own forms. For questions about what a contract or loan agreement requires, consult an attorney.