What is builder's risk insurance?
Builder's risk insurance protects buildings and materials during construction or renovation from damage caused by fire, hail, theft, vandalism, and more. It's an essential, specialized policy for Colorado and Utah projects.
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Complete Guide to Builder's Risk Insurance
Why This Question Matters for Colorado and Utah Residents
Builder's risk insurance isn't just an industry buzzword—it's a lifeline for any construction or renovation project in our region. Between Colorado's infamous June hailstorms and Utah's unpredictable wildfire and flood seasons, builders face unique risks that can derail timelines and budgets quickly. Having the right protection means your investment—and ability to finish on time and on budget—remains secure, whatever comes your way.
- Extreme Weather Protection: Colorado ranks #2 nationally for hail claims, and Utah faces increasing wildfire and flash flood risks. Builder's risk covers losses from these regional perils during active construction.
- Compliance with Lenders & Contracts: Most banks and commercial lenders in Colorado and Utah require builder's risk as a loan condition. It's also a key safeguard for developers and property owners overseeing substantial projects.
- Financial Peace of Mind: With average construction delays topping 46–70 days (often due to damage from covered risks), builder's risk prevents project-ending losses and expensive out-of-pocket repairs.
What Most People Get Wrong
Many assume their standard commercial property or homeowners insurance covers construction work—it does not. Builder's risk is specialized and only active during the renovation or ground-up build phase. Another common misconception: flood and earthquake coverage are often excluded unless specifically added, which is crucial in our region's variable climate.
Business owners also frequently underestimate the value of covering materials in transit or temporary storage. These exposures are common with remote job sites across Colorado and Utah.
The Complete Picture
Builder's risk insurance is a short-term policy designed to protect buildings, materials, equipment, and sometimes labor costs during construction, renovation, or repair. It covers perils like fire, hail, vandalism, theft, and wind—but policy specifics matter:
Coverage typically extends to:
- On-site building and materials
- Materials and equipment in transit or temporarily stored offsite
- Temporary structures (e.g., scaffolding, fencing)
- Soft “project” costs (like architectural fees, permits) if endorsed
Premiums average $750–$3,000 per $1M coverage in Colorado and Utah, with key rating factors including location (urban vs. rural), construction type, project duration, and the scope of protection. Lenders and municipalities may set stricter requirements for public-facing or high value projects.
Exclusions to watch for: flood and earthquake, wear and tear, faulty workmanship, and tools of contractors—these gaps require careful planning and, if necessary, supplemental policies.
Making the Right Decision for Colorado and Utah Residents
Question 1: How much coverage do I need for my project?
Before binding coverage, assess the full value of the structure, all building materials (on and offsite), and key equipment. Consider:
- What are current construction and materials costs (which have risen regionally up to 20% since 2021)?
- Are soft costs (permits, architectural/engineering fees) significant for my build?
Question 2: How long will construction (or coverage) last, and are there seasonal risks?
Builder's risk is written for a specific project timeline and automatically ends at completion or occupancy. In Colorado and Utah, plan for weather-related delays—hail, wildfire, and winter storms can push schedules by months. Always match policy term to realistic, not ideal, project timelines.
Question 3: Are there local regulatory or lender requirements I need to meet?
Lenders in both states usually require proof of builder's risk with specific limits, deductibles, and named insureds. Municipalities may demand evidence (especially for commercial or multi-family builds) before issuing permits. Consult your broker to verify compliance and avoid costly surprises.
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Real World Examples
Fire at Midtown Fort Collins Office Build
Background: Sarah is overseeing construction of a $1.2 million office building off Harmony Road in Fort Collins. She secured builder's risk coverage for the full contract value plus $100,000 in soft costs.
Coverage: $1.3 million policy, including materials stored offsite and essential project soft costs.
Monthly Premium: $250/month ($3,000/year)
The Incident: A fire during framing, caused by a sub's faulty tool, damages framing, windows, and electrical wiring.
Total Claim Cost: $128,000 (materials replacement: $78,000; labor: $35,000; architectural redrafting: $15,000)
Sarah's Cost: $5,000 deductible – builder's risk pays the rest, repairs begin within days.
"If we hadn't had builder's risk insurance, our timeline and budget would have fallen apart. Instead, FoCoIns helped us restore momentum right away."
Denver Hailstorm Delays Mixed-Use Project
Background: Matt is managing a $2.5 million mixed-use development near Colfax Avenue in Denver. Builder's risk was required by the bank for the full project value.
Coverage: $2.5 million, including coverage for materials and signage both on site and in transit.
Monthly Premium: $410/month ($4,900/year)
The Incident: In June, a 2-inch hailstorm shatters roofing materials and damages HVAC units stored on site, causing a three-week delay.
Total Claim Cost: $67,000 (roofing: $40,000; HVAC: $20,000; delays and scaffolding: $7,000)
Matt's Cost: $7,500 deductible – remainder covered by the policy, avoiding out-of-pocket replacement costs.
"Our whole schedule could have unraveled after that storm. Having builder's risk in place and local experts at FoCoIns made all the difference."
Salt Lake City Apartment Build: Water Loss Lessons
Background: Emily is developing a 20-unit apartment project in Salt Lake City with a $3 million budget. She debated skipping builder's risk but worked with her broker to compare scenarios.
Coverage: $3 million, includes materials in transit, temporary fencing, and a soft cost endorsement.
Monthly Premium: $495/month ($5,940/year)
The Incident: Heavy rain on a Friday night seeps into unsealed subfloors and stored insulation. Without builder's risk, damage would have cost $32,000 (material loss, mold remediation).
Emily's Cost: $10,000 deductible (with coverage) versus entire repair bill out-of-pocket otherwise.
"After seeing colleagues struggle with expensive delays, I’m grateful I got coverage. FoCoIns made the options easy to understand and helped me protect my investment."
Avoid These Common Mistakes
Mistake #1: Relying on Standard Property Insurance During Construction
What People Do: Assume their existing property or homeowners policy will cover new construction or renovation losses.
Why It Seems Logical: Regular policies protect buildings—so shouldn’t they protect during temporary works?
The Real Cost: Actual property policies exclude construction-phase risks. That means fire or hail damage during a build often isn’t covered, leading to $10,000–$100,000+ in direct, unrecoverable losses in Colorado/Utah’s high-risk weather seasons.
Smart Alternative: Secure a dedicated builder’s risk policy for active construction. FoCoIns will help you confirm exact start/end dates and necessary endorsements to avoid gaps.
Mistake #2: Underinsuring Materials in Transit or Storage
What People Do: Only insure what’s physically on site, ignoring costly materials stored elsewhere or being shipped to the project.
Why It Seems Logical: It’s easy to focus on the main structure—especially if storage locations or delivery timelines seem temporary or nonessential.
The Real Cost: Stolen or damaged materials off-site are common in Colorado and Utah due to jobsite theft and severe weather. Out-of-pocket losses frequently reach $5,000–$50,000, none recoverable if not scheduled on the policy.
Smart Alternative: Review with FoCoIns how builder’s risk can extend to offsite storage and materials in transit, and the documentation needed to protect your full investment.
Mistake #3: Forgetting to Endorse Soft Costs or Business Interruption
What People Do: Focus solely on hard construction costs, overlooking soft expenses (like design fees, permits) and lack of coverage for project delays.
Why It Seems Logical: The main worry is rebuilding—but when delays happen, there are many less-obvious financial losses.
The Real Cost: Without soft cost or business interruption endorsements, a single fire or storm can add $10,000–$50,000 in uninsurable costs (redesigns, extended permits, higher interest, ongoing payroll) to your bottom line.
Smart Alternative: Work with your FoCoIns advisor to add the right endorsements from the start. A tailored policy safeguards your project budget—not just the structure itself.
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