Guide · Builders Risk
How much builders risk do you actually need?
Most people size a builders risk policy to the number on the construction contract. That number is usually too low, and the gap between it and the true completed value is where an underinsured loss lives.
Logan Kroloff
Licensed Insurance Agent
There are two numbers to get right. The first sizes the structure: what it would cost to have the finished building standing, which is completed value, not the contract price. The second sizes the time a loss costs you, which the base policy does not touch at all. Take them in order.
The first number
What goes into completed value.
Builders risk for a single project is usually written on a completed-value form: you declare the finished value up front, and the premium is set on it. So the declared number has to be right.
Start with hard construction cost, the labor and materials to build the structure. Then add the parts of the project the base contract usually does not carry.
Owner-furnished items and allowances. The stone you sourced yourself, the appliances you bought direct, the lighting package that came out of an allowance and then ran past it. If it ends up installed in the house, it is at risk during construction, and it belongs in the limit whether or not the contractor's number captured it.
A buffer for change orders and escalation. Custom builds grow, and material prices move over a project that runs a year or more. Ten percent of hard cost is a reasonable starting point, and the number climbs from there the longer the build runs and the more of the material package is imported stone, specialty metal, or anything else whose price you do not control. A limit set to today's contract can fall short of the actual value at the moment of a loss, which is usually late in the build, when the most value is standing.
What does not go in: land. You cannot lose the dirt to a fire, and insuring it is premium spent on a value that is not exposed. Builders risk covers the structure and what goes into it, not the ground it sits on.
A renovation-only question
Insure the standing house too?
Building onto or renovating an existing home adds a question new construction does not have: whether to insure the structure that is already standing, not just the work you are doing to it.
A policy written only around the new work covers the addition and leaves the existing house exposed for the length of the project. If a burst pipe during the renovation floods the original structure, a new-work-only limit answers for the part you were building and not the part you already owned. For a gut renovation of a high-value home, the existing structure usually belongs inside the limit, and the sizing then runs on the combined value: the standing structure plus the work.
Setting the limit
Too low, and too high.
Declare the completed value too low and there is no coverage above the number you declared. A loss late in the build, with the structure nearly whole, runs past the limit, and you carry the difference. Under-declaring to shave premium is a poor trade, because the premium saved is small against the value left uncovered.
Declare it too high, by insuring land or padding well past a real completed value, and you pay rate on value that is not exposed. The goal is neither conservative nor aggressive. It is accurate: the true completed value of the structure, plus the buffer, and nothing that isn't actually exposed.
That sizes the structure. It says nothing about what a loss does to your schedule, which is the second number.
The second number
What a delay costs.
A fire six months from completion does not just cost you the burned framing. It resets the schedule. Through the delay you keep paying construction loan interest, you keep paying property taxes, you pay your architect and engineer to redraw and resubmit, and you keep renting somewhere to live while the move-in date you were counting on slides further out. None of that is in the base policy. It is soft cost, and it is covered only if you add the endorsement and size it for the delay you could actually face.
Delay-cost estimator
What a six-month slip would actually cost.
Enter the numbers from your build. The estimator returns the carrying cost of a delay, which is the exposure your base builders risk policy would not pay.
A 6-month delay could cost roughly $207,000 in carrying costs your base policy would not pay. That is the number soft-cost coverage is for.
Two hundred thousand dollars of exposure that never appears on a plan set is exactly what a completed-value limit ignores, because it is not part of the structure.
One adjustment before you treat the total as your coverage target: soft-cost endorsements usually pay only after a waiting period, a time deductible measured in days, so the opening stretch of any delay comes out of pocket and the recoverable figure runs somewhat below the gross exposure the estimator shows. Size to a delay you could plausibly hit, net of that waiting period, not the best case.
Estimator, not a quote.
Endorsement terms, waiting periods, and covered soft-cost categories vary by carrier. Use the total to frame the conversation, not to bind a limit.
Where this connects
From sizing, to coverage, to price.
Completed value is not only your limit. It is the input the premium runs on, so the number you land on here is the number that prices the policy. What builders risk costs takes it from there.
For what the policy actually covers in exchange for that premium, including the named insured, the special form exclusions, and how a loss pays, see how builders risk works.
It is also the number the handoff depends on. The completed value you insure during the build is the starting point for the homeowners coverage that takes over the day you occupy. That is a different sizing conversation, the replacement cost of the finished home, but it begins from the same place. Builders risk vs. homeowners covers the transition.
Common questions
On sizing, specifically.
Scoped to what you're building.
Tell us the completed value, the timeline, and the loan structure. A licensed advisor will return a right-sized recommendation, structure and soft cost, in about a day.