Builders risk insurance is designed to protect your project from the unexpected—but what if you buy the policy and still end up exposed? That happens more often than you’d think. Why? Because there are common mistakes builders, developers, and even experienced project managers make when purchasing coverage. Here’s the good news:
Let’s walk through the 5 biggest builders risk mistakes—so you can make sure your next project is protected from day one.
The issue: Coverage is only triggered once specific conditions are met—usually when materials arrive on-site or actual construction begins.
If you start the policy too early:
If you start it too late:
Real-world example:
A contractor ordered trusses to the site a week before the builders risk policy began. A storm destroyed the materials, and the insurer denied the claim because it occurred outside the policy period.
Fix it: Work with your insurance advisor to sync the policy’s start date with your site prep or material delivery schedule.
The issue: Many people set the policy limit based on contract price alone, without accounting for:
This leaves you underinsured—and paying out of pocket for anything above the limit.
Fix it: Base your limit on total completed value (including labor, materials, soft costs, and anticipated changes). And consider including a cushion for price increases.
The issue: Builders risk doesn’t automatically include flood, earthquake, or windstorm damage in many parts of the country—including coastal or high-risk zones.
Even inland projects may be vulnerable to flash floods or shifting soil conditions.
Fix it:
Ask if flood, wind, and earthquake coverage are excluded—and request endorsements or a standalone policy if needed. This is especially critical if:
The issue: Builders risk policies typically cover direct construction costs (labor, materials), but soft costs like loan interest, engineering fees, and permits can be significant—and are usually not covered unless specifically endorsed.
If your project is delayed due to a covered loss, you could still face tens of thousands in soft cost losses with no insurance to reimburse them.
Fix it: Add a soft costs endorsement to your policy, and work with your insurance advisor to calculate and itemize these costs accurately. Don’t assume they’re automatically included.
The issue: Standard builders risk usually covers materials only once they’re on the job site. If you have high-value materials:
…they may not be covered.
Fix it: Add property in transit and off-site storage endorsements. Customize limits based on your supply chain.
Recap: Your Builders Risk Safety Checklist
Before you buy, make sure you:
Need a Second Set of Eyes on Your Builders Risk Policy?
We work with builders, developers, and property owners every day to eliminate gaps and reduce risk. Before your next project kicks off, let’s talk about how to build smarter coverage into your budget.
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