What Is Builder's Risk Insurance and Does It Cover Theft of Materials?

TL;DR: Builder's risk insurance is a specialized policy covering buildings under construction against perils like fire, wind, and theft. It typically covers theft of materials intended for the project, provided they are stored on-site or in approved locations. Coverage is subject to policy limits, deductibles, and conditions such as proof of forced entry.

Construction projects involve substantial financial investment and exposure to risks like weather, vandalism, and theft. Builder's risk insurance—also called course of construction insurance—helps safeguard that investment by covering physical loss or damage to the structure, materials, and sometimes equipment during the building process. Understanding how theft coverage applies to materials is especially critical, as missing supplies can delay timelines and increase costs.

What is builder's risk insurance and how does it work?

Builder's risk insurance is a short-term property policy designed for buildings under construction, renovation, or addition. It covers physical loss from named perils such as fire, lightning, wind, vandalism, and theft. The policy typically covers the structure, construction materials, and sometimes machinery or equipment on-site, with coverage ending when the project is completed or abandoned.

• Covered property: The building under construction, raw materials, temporary structures, and sometimes scaffolding
• Policy period: Matches the construction timeline, usually months to a year
• Named perils: Fires, storms, explosions, vandalism, and theft are common
• Exclusions: Earthquakes, floods, faulty workmanship, and employee theft are typically excluded

Coverage is based on the project's total insured value, which includes the cost of materials and estimated construction costs. Policies are often written on an actual cash value or replacement cost basis, with deductibles ranging from $1,000 to $10,000 or more depending on risk.

Builder's risk insurance is purchased by the property owner, general contractor, or developer. Lenders usually require it as a condition of financing. The policy can be extended to include coverage for materials in transit, soft costs, or business income loss if delays occur.

Does builder's risk insurance cover theft of construction materials?

Yes, theft of construction materials is generally covered under builder's risk policies as a named peril. However, coverage is subject to specific conditions: the theft must be of a forced-entry nature, materials must be stored on the project site or in a location approved by the insurer, and the stolen items must be intended for the construction project. Policies may exclude theft from unlocked vehicles or unattended storage.

• Forced entry: Most policies require evidence of forcible entry to validate a theft claim
• Location: Materials stored off-site may require separate coverage or endorsement
• Limits: Theft coverage often has sub-limits, especially for high-value items like copper wiring or appliances
• Documentation: A police report and inventory of stolen items are usually required

Materials theft is a common risk on construction sites, particularly for valuable commodities like lumber, copper, or tools. Builder's risk policies help mitigate that risk by covering the cost of replacing stolen materials, subject to the policy's deductible and limit. It is important to review the policy for specific theft-related exclusions, such as those involving employees or contractors.

To maximize coverage, project owners should maintain a secure storage area, keep an inventory of all materials, and promptly report any theft to the insurer. Some policies also offer higher limits for theft if the site has security measures like fencing, lighting, or surveillance.

What other types of property are covered under builder's risk?

Builder's risk insurance covers not only the structure being built but also materials, machinery, and equipment used in the construction process. Typically, coverage extends to foundations, framing, roofing, installed systems (plumbing, electrical), and temporary structures like scaffolding. Some policies also cover construction forms, small tools, and debris removal.

Policies also cover materials in transit to the project site, but only up to a specified percentage of the total insured value. Off-site storage, such as a secured warehouse, may be covered if endorsed. Items like employee tools or personal property are generally not included.

It is important to distinguish between materials and equipment. While materials are usually automatically covered, heavy equipment like bulldozers or generators often require separate inland marine or equipment floater policies. Project owners should verify with their agent which items fall under the builder's risk policy.

What perils are typically covered and excluded in builder's risk policies?

Builder's risk policies are named-peril contracts, meaning they only cover losses caused by perils specifically listed in the policy. Standard covered perils include fire, lightning, windstorm, hail, explosion, riot, vandalism, and theft. Many policies also cover water damage from plumbing leaks, but exclude flood and sewer backup unless added.

• Common covered perils: Fire, wind, lightning, hail, explosion, smoke, vandalism, theft, and water damage from accidental discharge
• Common exclusions: Earthquake, flood, mold, wear and tear, faulty workmanship, employee theft, and damage caused by testing or commissioning
• Additional exclusions: War, nuclear hazard, and intentional loss are never covered

Exclusions like earthquake and flood require separate policies. The faulty workmanship exclusion means the cost to fix defective construction is not covered, but resulting damage from the faulty work (like a fire) may be. Policyholders should read the exclusions carefully, as they can vary by insurer.

Some perils, such as theft, have specific conditions. For example, many policies exclude theft from unattended vehicles or by employees. To ensure comprehensive protection, consider adding endorsements for extra perils like windstorm in high-risk areas or theft with lower deductibles.

How much does builder's risk insurance cost?

The cost of builder's risk insurance typically ranges from 1% to 4% of the total construction value, depending on project size, location, duration, and risk profile. For a $500,000 project, that means a premium between $5,000 and $20,000. Factors like materials theft risk, fire safety, and security measures affect the rate. Higher deductibles can lower the premium.

• Project value: The primary driver; higher value leads to higher premium
• Location: Areas prone to crime or severe weather increase cost
• Duration: Longer construction periods raise the risk and premium
• Security measures: Fenced sites, cameras, and guards can reduce theft-related premium loads
• Deductibles: Choosing a higher deductible (e.g., $5,000 vs. $1,000) can reduce premium by 10-20%

Insurers also consider the type of construction (wood frame vs. steel) and the occupancy type. Residential projects may be cheaper than commercial high-rises. It is important to accurately state the total insured value to avoid underinsurance, which could lead to reduced claim payments.

Obtaining quotes from multiple insurers and comparing coverage terms can help secure the best rate. Some insurers offer package discounts if the builder or owner also holds other policies like general liability or workers' compensation.

Who is responsible for purchasing builder's risk insurance?

The responsibility for purchasing builder's risk insurance is usually determined by contract or lender requirements. Often, the property owner or developer purchases the policy, naming the general contractor and subcontractors as additional insureds. Alternatively, the general contractor may buy the policy and include the owner. Lenders typically require the policy to protect their financial interest.

• Property owner: Often buys the policy to protect their investment and comply with loan conditions
• General contractor: May purchase if contractually obligated or to maintain control over coverage
• Additional insureds: Subcontractors and lenders can be added to the policy for protection
• Coordination: Ensure no gaps or overlaps with existing insurance like property or liability policies

In some cases, both the owner and contractor have separate policies, but that can lead to confusion during claims. It is better to have a single primary policy with all parties listed. The policy terms, including exclusions and deductibles, should be reviewed by all stakeholders.

The responsible party must ensure the policy is in place before construction begins and that it covers the full contract value. The builder's risk policy should be kept active until the project is accepted and permanent insurance is bound. Failure to maintain coverage can result in personal liability for losses.

How should you handle a theft of materials claim under builder's risk?

If theft of materials occurs, promptly notify the insurance carrier and local police. Document the scene with photos and video, and create a detailed inventory of stolen items, including quantities, descriptions, and estimated values. File a police report and obtain a case number. Submit a claim in writing with all supporting documents to the insurer.

• Immediate steps: Secure the site, take photos, and notify police
• Documentation: Prepare an inventory with receipts or invoices if available
• Claim submission: Provide the police report, inventory, and estimate of loss
• Insurer investigation: The adjuster may inspect the site and review security measures
• Settlement: Payment is based on actual cash value or replacement cost, minus deductible

Be aware of policy conditions, such as time limits for reporting (often 30 days) and requirements for proof of forced entry. If the theft involved an employee or occurred from an unattended vehicle, the claim may be denied. Keep copies of all correspondence and receipts for any replacement materials purchased.

To improve claim outcomes, maintain an up-to-date material inventory and ensure site security is robust. If a theft pattern emerges, consider increasing security or adjusting coverage limits. A public adjuster or attorney may help if the claim is underpaid or denied.

Key Takeaways

• Builder's risk insurance covers theft of construction materials, subject to policy conditions like forced entry and location.
• The policy is a named-peril form; common covered perils include fire, wind, vandalism, and theft, while exclusions include earthquake, flood, and employee theft.
• Cost typically ranges from 1% to 4% of total construction value, with deductibles between $1,000 and $10,000.
• Either the owner or general contractor can purchase the policy, but it is often required by lenders.
• Filing a theft claim requires prompt notification, a police report, and a detailed inventory of stolen materials.
• Review policy terms carefully and consider endorsements for enhanced theft coverage or higher limits.

This content reflects general insurance guidance as of July 28, 2026. Coverage details and availability may vary by insurer and jurisdiction. Readers should consult a licensed insurance agent to confirm specific terms and conditions for their construction project.