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Builders Risk Insurance: Real Claims Examples

Real-world Builders Risk Insurance claim scenarios showing what was covered, how much was paid, and lessons for business owners.

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Builders Risk Insurance: Real Claims Examples

Builders risk insurance (also called construction insurance) covers buildings and structures under construction from damage due to fire, vandalism, weather, and other covered perils during the construction period — protecting contractors, property owners, and lenders.

Coverage Summary

Builders risk insurance covers property that is under construction or renovation — protecting against loss or damage from fire, wind, theft, vandalism, and other perils during the construction period. It covers the structure being built plus on-site materials, supplies, and temporary structures. Required by lenders for construction loans. Owners, general contractors, and subcontractors all have insurable interests. Premiums typically run 1–4% of the project's total hard cost annually, with a policy term matching the construction schedule.

Fire During Framing — New Commercial Building

Industry: Construction / General Contractor

A 14,000 sq ft light commercial building under construction was destroyed by fire during the wood framing phase. The fire started due to temporary heating equipment left running overnight. Project value was $2.1M. Construction was 40% complete at time of loss.

Claim amount: $925,000

Outcome: Builders risk policy (completed value form, $2.1M limit) covered the loss. Settlement: $780,000 for destroyed framing lumber, structural materials, and site cleanup; $145,000 in soft costs (additional permit fees, architectural re-drawing, 90 additional days of construction loan interest). Project was rebuilt and completed 5 months after the fire. Without builders risk, the GC and owner would have split the $925,000 loss — likely project-ending.

Lesson: Temporary heating equipment is one of the most common causes of builders risk losses. Written hot work and temporary heating policies, daily site closure inspections, and smoke detection even during construction significantly reduce this exposure.

Related Resources

  • Builders Risk Insurance Coverage
  • Builders Risk Insurance FAQ
  • Insurance Resources