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.
Your trusted Colorado and Utah insurance expert, providing clarity and confidence for your next project.
Complete Guide to Builder’s Risk vs. General Liability Insurance
Why This Question Matters for Colorado and Utah Residents
Understanding the distinction between builder’s risk and general liability insurance is crucial for anyone involved in the construction, renovation, or development of property across Colorado and Utah. These policies respond to very different risks—and getting them wrong can mean costly out-of-pocket expenses, fines, or lost business.
- Local weather risks drive claims: Colorado ranks #2 nationally for hail claims, and Utah’s wildfire season continues to intensify. Builder’s risk protects your project itself from direct damage, while liability covers accidents your team causes to others.
- Construction is booming: Weld County leads Colorado in growth, and areas like Salt Lake City are seeing record development. More projects mean a higher chance of costly mistakes or accidents.
- Regulatory requirements are strict: Both states have timetables for claim resolution (Colorado mandates claims paid within 60 days if valid). The right policy ensures you’re not left waiting—or exposed.
What Most People Get Wrong
A common misconception is that “my contractor’s general liability policy covers everything on a jobsite.” In reality, general liability does not pay for damage to your own work or building—it only covers injuries to third parties and accidental damage to others’ property.
Another mistake is assuming builder’s risk will protect you from lawsuits or injury claims. Builder’s risk will pay for theft or hail damage to materials or structures under construction, but it does not cover accidents or injuries your crew causes to others. Both policies are needed for comprehensive protection.
The Complete Picture
Builder’s risk insurance is a specialized type of commercial property insurance for new construction, renovations, or major remodels. It covers property damage from events like fire, hail, wind, vandalism, and some types of theft. For example, if a hailstorm in Fort Collins damages a half-built roof, builder’s risk steps in to fund repairs, minus your deductible (typically $1,000–$2,500).
General liability insurance, on the other hand, covers your business if you cause bodily injury or property damage to a third party. For instance, if falling scaffolding injures a bystander on Main Street in Denver, or water from your project leaks into an adjacent business in Salt Lake City, general liability covers legal costs and damages owed.
For most Colorado and Utah businesses, best practice is to carry both builder’s risk and general liability, along with optional add-ons like business interruption or ordinance/law coverage. Failing to coordinate both leaves critical gaps—potentially jeopardizing not just your project, but your business’s financial health.
Making the Right Decision for Colorado and Utah Residents
Question 1: Does your contract—or jurisdiction—require both coverages?
Before starting a project in Colorado or Utah, ask:
- Does my lender, city, or client require proof of both builder's risk and general liability?
- Are there local regulations or permits (especially for public projects) mandating specific coverage levels?
Question 2: What exposures and financial risks are unique to my project or region?
For example, building in a hail-prone area of Northern Colorado or at a wildfire interface near Park City calls for higher property and interruption limits on builder's risk. If working near public foot traffic (e.g., Old Town Fort Collins), prioritize robust liability limits for third-party injury.
Question 3: Do I have a plan to update or supplement coverage as my project evolves?
Construction projects change. New subcontractors, added scope, or unexpected delays require you to review both policies. Will the investments and exposures mid-project still fit your original insurance plan—especially with Colorado’s and Utah’s rapid weather and regulatory shifts?
Trusted by Your Neighbors
Local knowledge, industry-leading protection
4.9/5 Stars
Google Reviews from real customers
97% Retention Rate
Fort Collins families and businesses protected
Independent
We work for you, not insurance companies
Local
Fort Collins owned & operated since 1992
Real World Examples
Fort Collins Retail Build: Theft Coverage Gaps Discovered
Background: Jenn, a small business owner in Fort Collins, started the buildout of a new retail store on Harmony Road.
Coverage: Jenn purchased builder’s risk insurance to cover the property under renovation, but relied on her contractor’s general liability for injuries and accidents.
Monthly Premium: $90/month ($1,080/year) for builder’s risk; included $1M general liability via her contractor.
The Incident: One weekend, $8,000 worth of brand-new inventory and power tools were stolen. Her builder’s risk policy covered the damages—except for internal employee theft, which was excluded by her carrier.
Total Claim Cost: $5,000 paid (after $3,000 deductible and certain items excluded as not covered)
Jenn's Cost: $3,000 plus cost of replacing non-covered items—prompting her to add a fidelity bond for future protection.
"I’m relieved most of the loss was covered, but my agent helped me see the gaps. Now, I know how to protect every angle."
Denver High-Rise Remodel: When Liability Makes the Difference
Background: Marcus was overseeing a multi-story condo renovation in downtown Denver. The general contractor held both builder’s risk and a $2M general liability policy.
Coverage: $400,000 in builder’s risk; $2M/$5M general liability coverage
Monthly Premium: $220/month ($2,640/year) builder’s risk; liability premium built into project cost
The Incident: A subcontractor accidentally triggered a sprinkler, causing water to flood the finished lobby of an adjacent unit worth $32,000 in repairs.
Total Claim Cost: $32,000 (paid in full by general liability carrier, plus attorney’s costs)
Marcus's Cost: $2,000 deductible—saved from additional legal expenses by having the right liability insurance in place.
"Our liability policy meant the difference between a manageable bill and a lawsuit. I’ll never start another project without one."
Salt Lake City Apartment Build: Hail Damage Hits the Budget
Background: Lisa’s firm was building a new apartment complex near I-15 in Salt Lake City. She opted for both builder’s risk and general liability based on her advisor’s counsel.
Coverage: $850,000 builder’s risk; $1M general liability
Monthly Premium: $380/month ($4,560/year) builder’s risk
The Incident: A June hailstorm (peak season in Colorado and Utah) caused $90,000 in roof and window damage to structures mid-build. The claim was covered, after a $5,000 wind/hail deductible, with glass replacement sub-limited to $15,000 as per the policy endorsements.
Total Claim Cost: $85,000 paid ($5,000 deductible deducted)
Lisa's Cost: $5,000 deductible—grateful for proactive advice, since nearby projects without coverage faced full out-of-pocket losses.
"Without the right builder’s risk, our budget would have been wiped out in minutes. Local expertise saved us big."
Avoid These Common Mistakes
Mistake #1: Assuming General Liability Covers Damage to Your Project
What People Do: Rely solely on a general liability policy, believing it covers theft or damage to their own construction.
Why It Seems Logical: Liability sounds comprehensive, and many think it applies to all jobsite losses.
The Real Cost: The average water damage or theft claim is $8,000–$25,000. Without builder’s risk, you pay this yourself—even though Colorado’s claim timelines are supposed to be fast, no insurer pays claims that were never covered by your policy.
Smart Alternative: Pair comprehensive builder’s risk (for property losses) with general liability (for third-party harm). FoCoIns can structure both for your unique risks and budget.
Mistake #2: Overlooking Regional Risks Like Hail or Fire
What People Do: Purchase bare-minimum coverage, not considering peak hail season (June in Colorado, northern Utah) or wildfire risk for frame construction projects.
Why It Seems Logical: Weather disasters feel unlikely—until they happen close to home, or local requirements are misunderstood.
The Real Cost: Hail claims can easily exceed $20,000 for minor damage, $100,000+ for major incidents. Many policies require wind/hail deductibles, and wildfire can shut down operations for months.
Smart Alternative: Review your builder’s risk coverages and deductibles with a local agent regularly. Build hail and wildfire scenarios into your coverage plan—don’t get caught off guard.
Mistake #3: Failing to Update or Supplement Policies Mid-Project
What People Do: Set up basic coverage on day one, then neglect to revise as scope or value increases (e.g., change orders, added structures, or new equipment).
Why It Seems Logical: Once insured, many assume “I’m covered” for any changes or additions.
The Real Cost: A project that doubles in value or adds exposures can leave you underinsured, leading to coinsurance penalties or denied claims if a loss occurs. Construction in dynamic weather areas like Denver and Salt Lake makes this mistake especially risky.
Smart Alternative: Build coverage review checkpoints into your construction schedule. With FoCoIns, we proactively review and adjust your coverages as your project— and risks—grow.
FAQs On The Same Topic
Find answers to your most pressing insurance questions right here.