Can I include coverage for flood or earthquake in my builder's risk policy?

Coverage for flood and earthquake is typically excluded from standard builder's risk policies, but many insurers offer these protections as add-ons or separate policies in Colorado and Utah. Ask about endorsements specific to your location's regional risks before starting your project.

Your trusted Colorado and Utah insurance experts, providing clear answers to protect your next build.

Complete Guide to Flood and Earthquake Coverage in Builder's Risk Policies

Why This Question Matters for Colorado and Utah Residents

Builder's risk insurance is essential for construction projects in Colorado and Utah, but standard policies come with key coverage gaps—especially for flood and earthquake risks that are increasingly relevant in our region.

  • Regional Risks Are Growing: Colorado regularly ranks #2 nationwide for hail claims and faces increasing post-wildfire flooding. Utah sees frequent small earthquakes, especially along the Wasatch Front, that can damage projects under construction.
  • Exclusions Are the Norm: Nearly all builder's risk policies explicitly exclude flood and earthquake unless coverage is added by endorsement or a separate policy. New regulations require agents to discuss these exclusions up front.
  • Claims and Premium Impacts: The cost of adding flood or earthquake coverage depends on your project's location. In high risk Colorado zones, flood add-ons can increase premiums by $1,500–$5,000+ per year; earthquake endorsements in Utah add $750–$4,000 depending on proximity to faults and soil type.

What Most People Get Wrong

Many Colorado and Utah builders assume their standard builder's risk policy covers all types of property damage during construction. In reality, "named perils" usually exclude both flood and earthquake unless coverage is requested specifically.

Another common misconception: lenders sometimes require proof of flood or earthquake insurance, but it is up to the builder to obtain these endorsements or purchase a separate policy—coverage does not happen automatically.

The Complete Picture

To be fully protected, you must work with your agent to assess your specific project risks and review your policy's exclusions. Flood coverage may be available via a separate policy (especially for projects in FEMA flood zones or post-wildfire areas in Larimer and Weld County, CO). Earthquake endorsements are increasingly recommended along Utah’s seismic corridor (Salt Lake, Provo, Park City) due to consistent minor quakes. These add-ons can significantly mitigate financial loss from rare but severe events, helping prevent expensive out-of-pocket rebuilding costs.

If your project is on a hillside in Boulder or SLC, or near a drainage area, customized endorsements are not just an extra—they're essential. Local expertise matters: FoCoIns agents are required by law and best practice to discuss these options during your project planning. Recent NAIC rules in Colorado also mandate clear documentation of flood exclusions and prompt (60-day) claims handling.

Making the Right Decision for Colorado and Utah Residents

Question 1: Is your build in a high-risk flood or earthquake area?

Knowing your property's exposure is essential. Check FEMA maps for flood zones and USGS data for earthquake fault lines. Some local risk considerations include:

  • Post-wildfire flood risk areas (e.g., north of Fort Collins, Glenwood Springs)
  • Salt Lake Valley’s Wasatch Fault corridor (Salt Lake City, Draper, Sandy, Provo)

Question 2: Do your lender or local building codes require specific insurance?

Many lenders require proof of additional flood or earthquake coverage for projects in mapped risk zones. Confirm:

  • Lender's certificate requirements for construction loans
  • Any local government mandates due to recent natural disasters

Question 3: How much risk—financially—can your business absorb?

Assess your project budget and what you could realistically pay out of pocket if uninsured. Keep in mind typical losses in Colorado and Utah construction claims exceed $100,000 for moderate flood or earthquake damage. Choosing the right deductible helps balance premium costs with manageable claim expenses.

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Real World Examples

"After the Tremor in Salt Lake City"

Background: Mark, a small developer, broke ground on a duplex in the Sugar House neighborhood of Salt Lake City. The builder's risk policy excluded earthquake coverage by default.

Coverage: Standard builder's risk with $500,000 policy limit, $1,000 deductible. No earthquake endorsement in place.

Monthly Premium: $120/month ($1,440/year)

The Incident: Four weeks into framing, a 4.5-magnitude quake caused cracks in the foundation and shifted wall frames. Mark discovered his claim was denied because earthquake damage was excluded.

Total Claim Cost: $48,000 (foundation stabilization, re-framing, inspections)

Mark's Cost: $48,000 – Entirely out-of-pocket due to lack of earthquake endorsement.

"I thought my builder's risk would handle anything mother nature threw at us. Now, I always ask my agent about add-on coverage for every project."

"A Greeley Project Faces a June Flood"

Background: Lisa was overseeing construction of a new agribusiness facility near the Cache la Poudre. Builder's risk coverage was in place but did not include a flood endorsement.

Coverage: Builder's risk policy with $2 million limit, $2,500 deductible. No flood coverage selected.

Monthly Premium: $250/month ($3,000/year)

The Incident: Heavy June thunderstorms led to river flooding and water intrusion just after building the foundation and trenching for utilities.

Total Claim Cost: $94,000 (site dewatering, replacing damaged materials, delayed completion penalties)

Lisa's Cost: $94,000 – All uncovered because flood is excluded without endorsement.

"One rainstorm wiped out months of planning and budget. I learned too late that flood coverage isn’t automatic—now, I never skip it for river-adjacent builds."

"A Fort Collins Builder Gets it Right"

Background: Chris, a contractor in Fort Collins, was building retail space near Old Town and had witnessed previous clients struggle with hail and water damage.

Coverage: Builder's risk policy with $1.5 million limit, $2,500 deductible. Flood and earthquake endorsements added per agent recommendation.

Monthly Premium: $370/month ($4,440/year)

The Incident: That summer, intense rainfall led to flash flooding on the block. Water entered the jobsite, saturating construction materials and foundation areas.

Total Claim Cost: $63,000 (water extraction, material replacement, temporary rerouting of utilities)

Chris's Cost: $2,500 deductible – The policy’s flood endorsement covered the rest.

"Adding flood coverage was extra up front, but saved my business from a major financial hit. I'd never build in Colorado without it again."

Avoid These Common Mistakes

Mistake #1: Assuming Standard Builder's Risk Covers All Hazards

What People Do: Many builders buy a basic builder's risk policy and overlook the fine print about excluded perils, never realizing flood and earthquake are not included.

Why It Seems Logical: Insurance is often marketed as "comprehensive," leading people to believe all major hazards are covered automatically.

The Real Cost: In Colorado and Utah, major flood or quake incidents can cause $40,000–$100,000+ in uninsured damage, jeopardizing project viability.

Smart Alternative: Review your policy for exclusions and proactively request flood and earthquake endorsements. Local FoCoIns advisors help clarify real risks for your build site and ensure you have every option explained—no guesswork.

Mistake #2: Ignoring Location-Specific Risks

What People Do: Builders use the same coverage for every project, regardless of whether it's near a river, in a post-fire zone, or on a known fault line.

Why It Seems Logical: Fast-growing businesses want consistency and simplicity—but Colorado and Utah property risks change from block to block.

The Real Cost: For projects in Weld County's flood-prone areas or Salt Lake's seismic zones, skipping endorsements can lead to repair bills from $50,000–$200,000, plus delays and lost revenue.

Smart Alternative: Work with a local expert to evaluate each project's site-specific exposures. FoCoIns agents provide risk maps and regional insights, ensuring coverage matches your build’s reality.

Mistake #3: Choosing Low Premiums Over Proper Protection

What People Do: Developers sometimes decline flood or earthquake endorsements to save $1,000–$5,000 in premiums.

Why It Seems Logical: It’s tempting to cut up-front costs on big builds, especially if you’ve never experienced a disaster firsthand.

The Real Cost: Sacrificing critical coverage can result in six-figure losses. One midsized Fort Collins contractor lost $75,000 in rebuild costs—five times more than the annual premium would have been.

Smart Alternative: Balance premiums with risk. Consider deductible options, and ask FoCoIns for full scenario breakdowns—so you know what you’re paying for and what’s at stake in a worst-case claim scenario.

FAQs On The Same Topic

Find answers to your most pressing insurance questions right here.

Do lenders require builder's risk insurance?

Yes, most lenders in Colorado and Utah require builder’s risk insurance before funding construction projects to protect their financial interest until the build is complete.

How does builder's risk insurance differ from permanent property insurance?

Builder's risk covers a building while it's under construction or renovation, protecting against damage before occupancy. Permanent property insurance takes over once construction is complete, covering the finished structure and ongoing operations.

What is testing coverage in builder's risk insurance?

Testing coverage in builder’s risk insurance safeguards against damage that occurs while new building systems—like HVAC or electrical—are being tested during construction. It’s critical for projects in Colorado and Utah facing complex system start-ups or severe weather risks.

Does builder's risk insurance cover subcontractors' work?

Yes, builder's risk insurance typically covers subcontractors’ work if they are listed in the policy, but always verify coverage specifics for your Colorado or Utah project.

Is theft by employees covered under builder's risk insurance?

Theft by employees is almost always excluded from builder's risk insurance. You'll need a separate fidelity bond or crime policy to get coverage for employee theft risks.

What are soft costs in builder's risk insurance?

Soft costs in builder's risk insurance include non-physical expenses such as interest, legal fees, lost rents, and permit costs that arise from construction delays due to a covered loss. In Colorado and Utah, adding soft cost coverage is essential to fully protect your building project from financial setbacks.

How do I file a claim under a builder's risk policy?

Report the loss immediately to your insurer, document all damage with photos and receipts, provide detailed project information, and cooperate fully with the claims process.

Do I need builder's risk insurance for renovation projects?

Yes, builder's risk insurance is strongly recommended for significant renovations or additions in Colorado and Utah to cover potential losses during construction. It bridges critical gaps left by standard property policies, especially in high-risk zones.

What is the difference between builder's risk and general liability insurance?

Builder’s risk covers property damage to the construction project itself, while general liability protects against third-party injuries or property damage resulting from construction activities.

Who should be named insured on a builder's risk policy?

All parties with a financial interest—usually the property owner, general contractor, and sometimes lenders or key subcontractors—should be named insureds on a builder's risk policy.