Who needs builder's risk insurance?
Property owners, contractors, developers, and anyone with a financial interest in a construction project in Colorado or Utah should secure builder’s risk insurance before work begins.
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Complete Guide to Who Needs Builder’s Risk Insurance
Why This Question Matters for Colorado and Utah Residents
Builder’s risk insurance is essential in Colorado and Utah, where severe weather, rapid regional development, and strict lender requirements shape construction risk. Failing to get the right coverage can mean costly project delays or financial loss.
- Extreme Weather Risks: Both Colorado and Utah have seen record hail events and wildfires—key drivers of construction claims locally. Without proper builder’s risk insurance, even a short hailstorm in Denver or Salt Lake City can cause thousands in uncovered losses.
- Lender & Permit Requirements: Most lenders and city permitting offices in Fort Collins, Colorado Springs, and Park City require evidence of builder’s risk coverage before funds are released or construction begins.
- Multiple Stakeholders: Construction projects often involve property owners, contractors, investors, and lenders. Regional data shows that projects with incomplete insured party lists face more disputes and claim denials, especially in CO’s busy growth corridors or Utah’s ski region developments.
What Most People Get Wrong
Many believe builder’s risk is just for contractors, but property owners, investors, and lenders should all be named insureds. In CO and UT, failing to do this leads to uncovered losses and legal disputes—especially where lenders or partial owners hold an interest.
Another common misconception is that standard commercial property insurance covers ongoing construction. It does not. Builder's risk is a standalone, project-specific policy with unique terms and exclusion lists for flooding and earthquakes unless specifically endorsed.
The Complete Picture
Builder’s risk insurance, a special type of commercial property coverage, is designed to protect materials, structures, and even temporary elements like scaffolding while a project is under construction or major renovation. In Colorado and Utah, most active projects over $100,000 in value are required by lenders or suggested by local construction advisors to have builder's risk in place from day one.
The policy covers damage from hail (with CO ranked #2 for claims), wind, wildfire, fire, theft, and vandalism. Typical premiums range from $800–$3,000 per $1M in value for standard risks, with higher rates in wildfire or hail corridors. Stakeholders must review exclusions carefully, as standard builder’s risk policies do not include flood coverage without a specific add-on. Named insureds should always include the property owner, general contractor, and any parties with a clear financial interest to avoid gaps or claims disputes. Naming all the right parties and activating coverage before ground-breaking is crucial to meeting lender and permit requirements and protecting everyone’s investment in the build.
Making the Right Decision for Colorado and Utah Residents
Question 1: Who actually has financial risk in this project?
Identify all stakeholders—owners, general contractors, developers, and lenders. Ensure each is named on the policy to avoid disputes and ensure prompt claim payment.
- List every entity or person providing funding or services.
- Talk with your insurance broker and legal team to verify all parties’ insurable interest.
Question 2: Is my project exposed to Colorado/Utah-specific risks?
Evaluate local hazards: Is your site in a hail- or wildfire-prone area (Fort Collins, Boulder, Park City)? Will supplies or work be exposed over winter or during thunderstorm season? Special endorsements—like hail buybacks or wildfire gap coverage—may be necessary for true peace of mind.
Question 3: Does my builder’s risk policy last until full project completion?
Coverage typically ends at certificate of occupancy or when the project is considered complete—often before final move-in. For projects facing delays or phased openings (common in Utah’s resort construction or Colorado’s multi-family builds), plan ahead to avoid uninsured gaps by communicating expected completion dates and milestones with your broker from the outset.
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Real World Examples
Residential Build in Fort Collins: Protecting the Investment
Background: Emily, a first-time property owner, hired a builder to develop a custom home on Harmony Road, Fort Collins. She financed the project with a local credit union.
Coverage: Builder’s risk policy for the structure, materials, and on-site equipment, naming Emily, her contractor, and her lender as insureds.
Monthly Premium: $160/month ($1,920/year for a $400,000 build project)
The Incident: Three months in, a hailstorm damaged the partially completed roof and materials staged outside—causing $22,000 in damages. The policy covered repairs, replacement materials, and related construction delays.
Emily's Cost: $1,000 deductible – All remaining costs covered by insurance.
"We had no idea how quickly a Colorado storm could set us back. The builder’s risk policy covered everything and kept us on schedule. I wouldn’t break ground without it."
Park City Commercial Development: Stakeholder Protection Makes the Difference
Background: Jason, a small developer, began a mixed-use retail and office project near downtown Park City. To secure bank funding and satisfy his construction loan, Jason needed builder’s risk coverage.
Coverage: Builder’s risk policy for the $2 million project, covering structure, materials, signage, and temporary installations. Named insureds included Jason, his contractor, and his bank.
Monthly Premium: $410/month ($4,920/year for 12 months)
The Incident: Vandals broke in one weekend, stealing building materials and damaging HVAC units. The total claim reached $38,500, quickly paid under the builder’s risk policy.
Jason's Cost: $2,500 deductible – Bank and contractor had no loss exposure.
"My banker was adamant about naming everyone on the policy. When the theft happened, payout was fast and everyone’s interest was protected—no finger pointing, just quick recovery."
Salt Lake City Remodel: When an Overlooked Stakeholder Faces Loss
Background: Alexis was renovating a historic property on 900 South in Salt Lake City. Her contractor secured builder’s risk, but did not list Alexis or her lender as named insureds.
Coverage: Builder’s risk for the value of renovation only, but incomplete on stakeholder inclusion.
Monthly Premium: $210/month ($2,520/year for a $600,000 renovation project)
The Incident: A small electrical fire damaged newly installed cabinetry and equipment. The policy paid the contractor, but Alexis and her lender faced payment delays and additional legal hurdles to recover their losses.
Alexis’s Cost: $10,000 (legal fees and temporary financing) due to coverage gaps.
"I learned the hard way—always check who’s listed on the policy, not just that you have one. The right coverage means having your interests fully protected from day one."
Avoid These Common Mistakes
Mistake #1: Assuming Only the Contractor Needs Coverage
What People Do: Many property owners or developers believe it’s up to the general contractor to carry builder’s risk insurance, so they delegate responsibility—or don’t verify who is named on the policy.
Why It Seems Logical: Contractors are the ones performing the work, so it feels natural for them to handle insurance.
The Real Cost: If a claim arises and only the contractor is listed, property owners, investors, or lenders may have no access to payouts. This has led to payment denials of $10,000+ or even exposed entire loans in Colorado and Utah projects.
Smart Alternative: Work with an expert broker like FoCoIns to ensure all parties with a financial stake are listed and coverage is validated before construction begins. This avoids legal disputes and ensures prompt recovery from losses.
Mistake #2: Waiting Until After Groundbreaking to Start Coverage
What People Do: Some delay buying builder’s risk until after initial work starts, thinking they can “add it later” or save on premiums.
Why It Seems Logical: Trying to minimize costs or confusion at the start, or assuming early work isn’t high-risk.
The Real Cost: Damage or theft before policy inception—such as storms or theft in the first weeks—won’t be covered. Standard policies in CO/UT require coverage to begin before any site work. Losses can range from $5,000 for tools/materials to $50,000+ for storm damage.
Smart Alternative: Secure builder’s risk before the first shovel of dirt is moved. FoCoIns helps you time coverage to ensure compliance with lender and municipal requirements, so you’re never left exposed at any project phase.
Mistake #3: Overlooking Region-Specific Risks and Exclusions
What People Do: Many purchase a builder’s risk policy “off the shelf” without customizing it for hail, wildfire, or flood—the top regional claim drivers in CO and UT.
Why It Seems Logical: Standard policies appear comprehensive, and additional endorsements seem optional or expensive.
The Real Cost: A severe hailstorm, wildfire, or post-fire flood can mean out-of-pocket costs of $15,000–$300,000 if not specifically covered. In 2023, over 40% of uninsured construction claims in Northern Colorado stemmed from excluded hazards.
Smart Alternative: Review every endorsement and exclusion with your broker. FoCoIns ensures your policy matches regional realities—so you’re protected from the risks that matter most where you build.
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