What does builder's risk insurance cover?
Builder's risk insurance covers the structure under construction, on-site and off-site materials, in-transit goods, and certain soft costs like extra loan interest or lost sales if delays result from covered events.
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Complete Guide to Builder's Risk Insurance Coverage
Why This Question Matters for Colorado and Utah Residents
Builder's risk insurance isn't just a technicality—it's the financial foundation for construction projects across Colorado and Utah. Knowing exactly what it covers helps you avoid costly missteps and recover quickly from jobsite setbacks. Our region faces some of the country's most severe weather and fast-moving construction cycles, making proper coverage critical.
- Regional Weather Risks: Colorado ranks #2 nationally for hail claims and faces regular wildfires and flooding. Utah projects contend with high winds and late spring storms.
- Compliance & Lending: Lenders and local ordinances in Denver, Fort Collins, and Salt Lake City often mandate builder's risk coverage for permitting and financing.
- Changing Construction Costs: With material prices and labor costs fluctuating, only robust coverage can protect you from price spikes after a loss.
What Most People Get Wrong
Many assume builder's risk covers all construction risks, or that standard property insurance applies during building. In reality, builder's risk specifically covers property damage and does not automatically include coverage for flooding, earth movement, or certain soft costs unless those are added by endorsement. In Colorado and Utah, failure to address these perils is a leading cause of denied claims.
Another common error: overlooking the need to insure materials stored off-site or in transit—especially crucial with current supply chain and theft exposure in the region.
The Complete Picture
Builder’s risk insurance typically covers property damage to buildings under construction, permanent and temporary structures, materials on-site, materials stored off-site, materials in transit, and often scaffolding and construction signage. Covered perils include fire, theft, vandalism, wind, hail, certain water damage, and in some cases, costs like loan interest or extra soft costs due to specified delays. Coverage lasts until the project is completed or transferred to permanent property coverage.
Important local nuance: Standard policies exclude flood, earthquake, and sometimes wind/hail unless specifically added. Colorado’s hail peak (June) and Utah’s windstorm season (spring/fall) mean unendorsed policies might leave major gaps. Make sure to discuss site-specific exposures and the handling of materials stored off-site with your agent to prevent coverage surprises.
Making the Right Decision for Colorado and Utah Residents
Question 1: What risks are most likely at my project site?
Start by identifying local perils that could threaten your construction:
- Location-specific risks (hail in Fort Collins, fire/wind in Boulder, flash flooding near mountain towns)
- Material theft or vandalism, especially in high-growth or urban Denver/SLC neighborhoods
Question 2: Have I included all materials and soft costs in my coverage?
Verify your policy covers not just the structure, but also:
- Materials stored off-site or delivered in phases
- In-transit goods from suppliers
- Soft costs (like lost sales, loan interest) due to covered delays if essential for your cash flow
Question 3: Will my project stay protected if local conditions change?
Assess whether your policy allows for endorsement adjustments or increased limits should construction costs spike or code upgrades become necessary (especially after regional disasters). Proactive reviews with your broker can prevent gaps if your build or local requirements change during the project.
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Real World Examples
Storm Strikes on Harmony Road (Fort Collins, CO)
Background: Jake, a local builder, began construction on a retail strip along Harmony Road in Fort Collins, budgeting for $1.8M in structures and $400,000 in HVAC and glass stored on-site and at a warehouse.
Coverage: Builder’s risk policy for $2.2M, including materials on-site, off-site, and in transit. Deductible: $5,000.
Monthly Premium: $575/month ($6,900/year)
The Incident: Torrential June hailstorm (CO's peak season) punches through construction wrap and ruins $110,000 in glass and fixtures stored on property and at the warehouse.
Total Claim Cost: $110,000 (glass and fixture replacement, emergency site wrap-up, and debris removal)
Jake's Cost: $5,000 deductible—thanks to extended off-site coverage, the warehouse loss was included.
"Without the builder's risk including off-site coverage, I'd have had to cover $45,000 of the warehouse loss out of pocket. Instead, we kept the project on track and the owner never knew the difference."
Denver In-Transit Nightmare Averted
Background: Sarah was overseeing an apartment build near South Broadway in Denver with $3.2M in total project costs. Important windows were shipped from out of state, valued at $160,000.
Coverage: Comprehensive builder’s risk including in-transit materials, soft cost endorsement, and temporary structure protection. Deductible: $10,000.
Monthly Premium: $850/month ($10,200/year)
The Incident: During delivery, a highway accident on I-25 destroyed the windows in transit.
Total Claim Cost: $160,000 ($150,000 windows + $10,000 expedited reordering and site security)
Sarah's Cost: $10,000 deductible—the policy paid the rest, including expedited soft costs.
"If we'd skipped in-transit coverage to save a little on premium, the entire timeline would have collapsed and so would our profit. Lesson learned the easy way."
Salt Lake City: Thieves and Rain Delay the Build
Background: Luis managed a commercial build in Salt Lake City's Sugar House district. Building value: $1.2M with $300,000 in mechanicals on-site during late spring.
Coverage: Builder’s risk policy including theft/vandalism and business income extension for soft costs. Deductible: $5,000.
Monthly Premium: $490/month ($5,880/year)
The Incident: Nighttime theft stripped $50,000 of copper, then a week-long rain delayed the replacement delivery, pushing back opening day and triggering interest penalties and lost rental income.
Total Claim Cost: $67,000 ($50,000 copper, $12,000 rain water mitigation, $5,000 in extra loan interest)
Luis's Cost: $5,000 deductible—the policy covered both the stolen goods and soft cost overruns.
"Our builder's risk agent made us add vandalism and soft cost coverage. That saved us $17,000 in interest we weren't planning for. FoCoIns knew what questions to ask."
Avoid These Common Mistakes
Mistake #1: Assuming Standard Builder’s Risk Covers Flood, Hail, or All Project Materials
What People Do: Skip flood or hail endorsements, assuming the base policy covers any cause of loss, and neglect to include off-site or in-transit materials in the coverage schedule.
Why It Seems Logical: People expect 'builder's risk' to mean 'all risks' for the build, especially since weather events are so common here.
The Real Cost: A Fort Collins builder lost $45,000—hail ruined materials stored off-site not scheduled in the policy. After wildfires, Colorado and Utah also see post-burn floods, which are always excluded if not endorsed. This gap can mean $50,000–$100,000 or more in uninsured losses.
Smart Alternative: Review exclusions with a licensed local expert. Always endorse hail, wind, or flood if your site or schedule suggests elevated risk, and itemize all materials locations to ensure complete protection.
Mistake #2: Focusing Only on Hard Costs—Ignoring Soft Cost Coverage
What People Do: Buy just enough coverage to replace the building and main materials, but skip soft cost endorsements (loan interest, lost rents, additional advertising, etc.) to save on premium.
Why It Seems Logical: Soft costs seem optional or minor compared to the building itself, especially on a tight budget or short timeline.
The Real Cost: During a delay (like a weather shutdown or theft), unexpected loan penalties or lost sales can add $10,000–$100,000. In Utah, average lost-rent claims after a one-month construction delay top $22,000. Without soft cost coverage, you pay these out of your own pocket.
Smart Alternative: Work with your agent to audit your build’s full cashflow risks—not just physical loss—and include tailored soft cost endorsements.
Mistake #3: Letting Coverage Expire Too Soon or Overlapping With Permanent Property Insurance
What People Do: Cancel builder’s risk insurance the moment a construction milestone is met—or forget it’s still active after property insurance begins—assuming there’s no risk gap.
Why It Seems Logical: Builders want to avoid paying for duplicate coverage, but don’t always confirm exactly who assumes risk at each project phase.
The Real Cost: Projects in Colorado and Utah are fast-paced, and up to 8% of property losses occur just before final handover due to unanticipated perils. Overlapping coverage can cost $200–$2,000 in extra premium, but a lapse could result in $50,000–$1M+ uninsured loss in the handoff window.
Smart Alternative: Coordinate a handoff plan with your broker and buyer. Ensure written confirmation for the transition of risk, and allow a short period of overlap instead of risking a costly coverage gap.
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