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.
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Complete Guide to Builder’s Risk Named Insureds
Why This Question Matters for Colorado and Utah Residents
Correctly listing the named insureds on your builder’s risk policy isn’t just paperwork—it’s the difference between full protection and catastrophic out-of-pocket loss if disaster strikes during construction. In Colorado and Utah, unique weather patterns, rapid population growth, and strict construction loan requirements make proper policy structure even more critical:
- Local weather risks: Northern Colorado faces the country’s #2 hail claims rate, and Utah builders contend with rising wildfire risks. Severe weather leads to claims averaging $67,000–$250,000 per event for commercial projects.
- Strict lender requirements: Many banks funding CO/UT projects require both the property owner and the lending institution to be named insureds—omitting any party can jeopardize financing or claims payments.
- Stakeholder diversity: Large projects often involve multiple owners, investors, and contractors/subcontractors with substantial financial interests. Only those named on the policy are protected.
What Most People Get Wrong
Many assume the builder’s risk policy should only name the property owner, overlooking contractors, lenders, or others with a direct stake. This mistake can mean unpaid claims—especially for soft costs (like interest or delay expenses) vital for staying on track after major losses. Another common error: believing subcontractors are automatically covered when, in fact, only explicitly listed parties get protection.
The Complete Picture
Best practice is to include everyone with a significant financial interest as a named insured: typically, the property owner, general contractor, and often the construction lender. For complex developments (common in Colorado’s fast-growing counties and Utah’s ski destinations), this can also mean key subcontractors or investors.
Builder’s risk policies pay for covered damage to structures, materials, and sometimes soft costs during construction. But claims are only paid to those listed as named insureds. Regional regulations mean lenders and code agencies may require specific endorsements, especially for projects in hail, wildfire, or flood-prone areas. Waiting until after a loss to sort out who should have been protected can mean denied claims and costly lawsuits.
Work with a knowledgeable independent agent who understands Colorado and Utah construction realities. They’ll help you list the correct parties, review lender requirements, and ensure everyone at risk of loss is truly protected—so your project doesn’t stumble at the finish line.
Making the Right Decision for Colorado and Utah Residents
Question 1: Who truly has a financial interest in this project—and are they listed?
Identify every party risking capital or expected to benefit if the project succeeds. Check these points:
- Property owner(s), including investment partners
- General contractor and at-risk subcontractors
- Lending institutions (construction lenders, banks)
- Anyone contractually obligated for losses (design-build teams, development authorities)
Question 2: What does my lender or municipality require?
Lenders in Colorado and Utah may have strict builder’s risk requirements—missing a named insured could delay funding or closings. Always:
- Request a sample insurance certificate from your lender upfront
- Confirm with city/county offices if local ordinances specify additional insureds for code compliance or public projects
Question 3: How will Colorado/Utah risks affect our coverage?
With severe hail, wildfire, and project delays impacting builds regionally, make sure all stakeholders can access claims for both physical damage and soft costs (like permit fees or interest). Planning ahead covers everyone’s interests—and helps avoid disputes or uninsured losses later on.
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Real World Examples
Harmony Road Rebuild: Owner, Contractor, and Bank Protected (Fort Collins, CO)
Background: Sarah, a local developer, broke ground on a new retail complex near Harmony Road. She, her contractor, and the project’s lender were all named insureds on the builder’s risk policy.
Coverage: $1.5M structure, including soft costs and delay expense; deductible $5,000.
Monthly Premium: $410/month ($4,920/year)
The Incident: After spring hail (one of Colorado’s top insurance threats) caused $124,000 in roof and window damage, work was delayed 18 days—incurring $17,000 in extra loan interest and permit re-inspections.
Total Claim Cost: $141,000 (structural repair $124,000, soft costs $17,000)
Sarah's Cost: $5,000 deductible – coverage paid the rest.
“Having all stakeholders on the policy meant repairs and soft costs were covered fast—no finger-pointing or financing headaches. I’d never skip this step again.”
Park City Custom Home: Contractor Omitted, Claim Dispute (Utah)
Background: Mike, a general contractor, was building a luxury home in Park City. Only the property owner was listed as named insured—Mike was not.
Coverage: $2M replacement cost, no soft cost or delay endorsement; deductible $7,500.
Monthly Premium: $520/month ($6,240/year)
The Incident: A major windstorm toppled framing, causing $86,000 in damage and a 25-day delay. The owner’s claim was paid—but Mike’s out-of-pocket costs (crew overtime, lost profits) were not covered, leading to a costly dispute and strained relationship.
Total Claim Cost: $86,000 (covered), $21,000 (not covered for contractor’s expenses)
Mike's Cost: $21,000 unreimbursed – he had no direct claim rights.
“As a builder, I learned the hard way—if you’re not named on the policy, you might be stuck with the bill after a loss. Always double-check.”
Downtown SLC Remodel: Lender Left Off, Funding Delay (Salt Lake City, UT)
Background: Emily oversaw a mixed-use remodel funded by a regional bank. The owner and contractor were named insureds—but the bank was only listed as a certificate holder, not a named insured.
Coverage: $3M structure with business interruption coverage; $10,000 deductible.
Monthly Premium: $770/month ($9,240/year)
The Incident: After a winter freeze burst pipes and delayed work, the claim was paid to the owner and contractor. The bank faced a weeks-long funding hold because their interest wasn’t protected, delaying draws and threatening project completion dates.
Total Claim Cost: $198,000 (property and lost business income)
Bank’s Cost: Delayed funds, legal fees for policy correction.
“Our missed named insured delayed payments and nearly caused the project to collapse. Now, lender review is a required step for every policy.”
Avoid These Common Mistakes
Mistake #1: Only Naming the Owner on the Policy
What People Do: List only the property owner, assuming others are automatically covered.
Why It Seems Logical: The owner pays for the policy and owns the property, so it feels natural to focus on their protection.
The Real Cost: Contractors or lenders left off may have zero claim rights, leaving them exposed to out-of-pocket costs or loan defaults after a loss. In Colorado or Utah, this can mean $25,000–$200,000+ in unreimbursed losses.
Smart Alternative: Work with an independent agent (like FoCoIns) to audit all parties’ interests and ensure everyone at risk is truly protected on the policy.
Mistake #2: Skipping Soft Cost and Delay Coverage for Key Stakeholders
What People Do: Buy the bare minimum builder’s risk coverage—only for physical construction—not including soft cost extensions.
Why It Seems Logical: Soft costs (like loan interest, permit fees, or rent during delays) aren’t always obvious upfront—so people assume the basic policy is enough.
The Real Cost: In Colorado and Utah, weather or supply chain issues can force delays, with soft costs averaging $6,000–$25,000 per event. Uncovered parties pay these expenses themselves during project setbacks.
Smart Alternative: Make sure your policy includes soft cost/delay endorsements, especially if your lender or contractor expects to be reimbursed for these risks.
Mistake #3: Failing to Align the Policy With Lender or Local Government Requirements
What People Do: Finalize the policy without reviewing lender/municipal insurance needs or required endorsements for local code compliance.
Why It Seems Logical: Complex project timelines mean insurance feels like a box to check—so confirming fine print gets skipped.
The Real Cost: Missed named insureds or endorsements can trigger loan funding delays, permit denials, and legal disputes that cost weeks of revenue or add $10,000+ in professional/legal fees.
Smart Alternative: Always coordinate with your project’s lender and municipality—an independent agent will help ensure your builder’s risk policy is fully compliant before you break ground.
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