What kind of insurance do builders have?

Builders and construction companies typically carry a combination of specialized insurance policies to cover property, liability, and their workforce:

1. Builder’s Risk Insurance

• What it covers: The physical building or structure under construction, along with on-site building materials, fixtures, equipment, and items in transit.
• Against perils: Fire, theft, vandalism, wind, hail, and lightning.
• Duration: It is a temporary policy that lasts only while the project is active and ends once the building is occupied or completed.

2. Contractor’s General Liability Insurance

• What it covers: Third-party claims for bodily injury, property damage, or advertising injury caused by the builder's operations, staff, or ongoing work.
• Why it matters: It pays for legal defense and settlements if a visitor or non-employee is hurt on the job site or if neighboring property is damaged.

3. Workers’ Compensation Insurance

• What it covers: Medical bills, rehabilitation, and lost wages if a builder or construction employee is injured or falls ill on the job.
• Why it matters: Most states legally require employers to carry workers' compensation to protect crew members.

4. Commercial Auto Insurance

• What it covers: Work vehicles, trucks, and vans used to transport tools, machinery, and crew members to and from job sites.

5. Inland Marine & Equipment Insurance

• What it covers: Specialized tools, mobile machinery, and heavy equipment (like generators or skid-steers) while they are stored on-site, in transit, or parked at different locations.

6. Umbrella / Excess Liability Insurance

• What it covers: Extra liability protection that kicks in when a claim exceeds the limits of standard general liability, auto, or employer's liability policies.

7. Surety Bonds

• What they do: Not traditional insurance, bonds act as a financial guarantee to the client or government that the builder will complete the project and fulfill contractual obligations.

As a builder, you need Commercial General Liability (CGL) and Workers' Compensation as your foundational coverages, alongside project-specific policies.

Essential Insurance Policies for Builders

• General Liability Insurance: Covers third-party claims for bodily injury (if a visitor or client is hurt on-site) and property damage you cause to someone else's property.
• Workers' Compensation Insurance: Covers medical bills and lost wages if your employees suffer work-related injuries or illnesses.
• Builder’s Risk Insurance (Course of Construction): Protects the physical building, materials, and equipment on-site from damage caused by fire, wind, theft, or vandalism during the build.
• Contractor's Equipment Insurance: Protects your specialized tools, machinery, and mobile gear whether they are at the job site, in transit, or stored at your shop.
• Commercial Auto Insurance: Covers cars, trucks, and vans used for hauling tools, materials, and traveling between job sites.
• Professional Liability / Errors & Omissions (E&O): Covers you if a client sues over design flaws, professional mistakes, or planning omissions.

A $1,000,000 contractor general liability insurance policy costs between $40 and $160 per month (or roughly $500 to $2,000 per year) for most small-to-midsized operations.

Your final premium varies significantly based on your specific trade, revenue, and claims history.

Average Monthly Costs by Trade

Because insurance premiums are tied directly to the physical risks of the job, different contractor specialties pay different amounts for the exact same $1M/$2M (per-occurrence/aggregate limit) coverage. Data from leading digital insurance marketplaces like Simply Business and NEXT Insurance outline the typical median monthly costs:

Note: Solo independent contractors or consultants working entirely off-site without high-risk equipment often see rates as low as $29 per month.

Key Factors that Drive the Cost Up or Down

Insurance carriers calculate your specific rate using a few primary metrics:

• Payroll & Revenue: Higher gross sales and larger crews mean more active job sites and higher risk exposure. For major commercial contractors with multiple employees, premiums can jump to several thousand dollars annually.
• Subcontractor Usage: If you hire out significant portions of your projects to subcontractors, your premium will increase unless you can prove they carry their own adequate insurance.
• Location: Densely populated states or regions with higher local claim frequencies and steep legal court costs command higher premiums.
• Claims History: A clean track record scores preferred tier pricing, while prior claims signal high risk and immediately drive rates up.

Per Occurrence vs. Aggregate Limits

When you buy a "$1 million policy," you are typically buying a $1M per-occurrence / $2M aggregate policy. This means the insurer will pay a maximum of $1,000,000 for a single claim, and up to $2,000,000 total over the course of the 1-year policy term. Moving your aggregate limit from $2 million up to $4 million usually only adds a few dollars to your monthly payment.

Builder's risk insurance (also called course of construction insurance) covers buildings, materials, and equipment against unexpected physical damage, theft, and weather disasters while a property is being built or heavily renovated.

What It Covers

• The Physical Structure: Foundations, framing, roofing, and permanently installed fixtures.
• Materials and Supplies: Building supplies stored on-site, in transit, or at temporary off-site locations.
• Debris Removal: Costs to clean up the site after a covered loss.
• Soft Costs (with endorsements): Financial losses from construction delays, such as extra loan interest, real estate taxes, or lost rental income.

What It Excludes

• Worker Injuries and Liability: Third-party injuries or employee accidents are not covered (you need general liability and workers' compensation for this).
• Faulty Workmanship: Costs to repair defective design, poor work, or bad materials.
• Normal Wear and Tear: Rust, corrosion, or settling.
• Standard Disasters (unless added): Earthquakes and floods are usually excluded unless you buy specific policy add-ons.

Learn more details on protecting your project via Rocket Mortgage's Builder's Risk Guide or compare policy specifics through NerdWallet's Builder's Risk Overview.

Builder’s risk insurance (also known as course of construction insurance) typically costs between 1% and 5% of the total completed project value. For most small-to-midsize residential builds or renovations, this works out to an average premium of $400 to $3,000 for a 6-to-12-month term.

Cost by Project Value

Because premiums are calculated based on your total budget—including labor, materials, and temporary structures—the scale of the project is the primary cost driver.

Note: For very small projects under $300,000, many competitive carriers implement a minimum premium floor that sits around $375 to $425.

Primary Cost Factors

• New Construction vs. Renovations: Renovations are generally 60% more expensive to insure per dollar of value than new builds. This is because remodeling introduces additional risks, such as damaging the existing structural foundation or working around outdated building materials.
• Construction Materials: Framing materials affect your rate. Structures built with fire-resistive materials (like concrete and steel) qualify for lower rates than traditional wood-frame builds.
• Geographic Location: Projects located in high-risk zones—such as coastal regions prone to hurricanes or areas exposed to wildfires—will see higher premiums. Proximity to the nearest fire station also plays a role.
• Policy Extensions: If your project falls behind schedule and you need to extend coverage beyond the initial term, the carrier will charge an extension premium based on current market rates.

Getting Covered

If you are financing the construction, most lenders will require an active policy before releasing funds. Major insurers like Zurich and US Assure offer specialized builders risk plans, while brokers like Liberty Insurance or NerdWallet's business guides can help you compare tailored rates for your project.