Why Architects Should Ask About Builders Risk Insurance Before Groundbreaking

$1,500. That’s roughly what a year of builders risk insurance costs on a $500,000 new-construction project, priced at about 30 cents per $100 of value. A $300,000 renovation costs more to insure than that, despite the smaller project size.

Builders Risk Insurance, an agency that has placed builders risk coverage in all 50 states for more than 26 years, works with property owners, contractors, and the architects and engineers behind the project, and reports that renovation work consistently costs more to insure than the project size alone would suggest.

Renovation costs more because the risk is different, not because the building is bigger

New construction runs about 30 cents per $100 of project value. Renovation and rehab work runs about 65 cents per $100, more than twice as much even when the project has a smaller scope. A basic policy has a minimum premium of roughly $700 for twelve months on projects up to $200,000, so even a smaller project still has a minimum cost for coverage. The difference between new construction and renovation rates is mainly due to what a contractor already knows about the property before work begins.

A new build starts with an empty site, so there are fewer unknowns behind the walls. A renovation is different since it involves working around what is already there. Old wiring, aged plumbing, a roof of uncertain condition, all of it sits behind finished surfaces until demolition starts, and insurers account for that uncertainty when setting the premium before the first wall comes down.

The policy covers more than what’s on the drawings

Builders risk coverage extends to materials and fixtures on site, equipment such as elevators and HVAC systems once they’re installed, and temporary structures like scaffolding. It can also cover debris removal after a covered loss, and reimbursement when a change in building codes during the project requires redesigns or causes delays. That last type of coverage affects architects specifically: a building department that updates its code halfway through construction can turn a finished set of drawings into a change order overnight.

Consider an architect overseeing a $420,000 mixed-use addition in a mid-sized downtown. Three months in, a storm floods the site overnight and damages framing, stored materials, and a set of printed construction documents that were left in a site trailer. The standard replacement coverage handles the framing and materials. Losing the printed drawings and any electronic backups would be a separate problem entirely if the policy didn’t also cover valuable papers and data, which most builders risk policies do.

Fire is the risk the schedule doesn’t account for

According to the National Fire Protection Association, U.S. fire departments respond to nearly a dozen construction-site fires a day, and that number has been increasing rather than decreasing in recent years. A building under construction is more exposed to fire than a completed structure. At the same time, sprinklers, smoke detection, and fire alarms often aren’t installed and operational until late in the schedule, leaving the building vulnerable during much of the construction period.

The number increases with location and construction type too. A project in a high-risk coastal or wildfire zone can add 10 to 20 percent to the premium. Wood-frame construction, which burns faster and less predictably than steel, can add another 10 to 15 percent on top of that.

The policy has a clock nobody mentions until it runs out

Builders risk premium is paid fully when the policy starts. Finishing the project early doesn’t bring a refund. Coverage itself ends when the policy expires, the building is occupied, or the owner accepts the project, whichever happens first, no matter what date is written on the policy. An architect who assumes the coverage continues past substantial completion could end up relying on coverage that has already ended.

$1,500 for a new build, more for a renovation of half the size. The interesting part isn’t the price itself. It’s what that price covers: everything sitting exposed on a job site before the building can protect itself.