Builder’s Risk Insurance Cost Factors

One of the most common questions we get asked regarding construction & contractor’s insurance is “How much does it cost?”.  Great question but it is almost impossible to answer without first knowing some key details about the project.  Most of our clients are surprised to find out how affordable Builder’s Risk insurance coverage is, especially on new construction projects.  And while every insurance carrier has their own underwriting guidelines, policy forms, and rates, the key factors that determine the price of the policy are: Construction Costs, Location, Project Type, and Construction Type.  Let’s break these factors down a little.

Construction Costs

It is important to first point out that a Builder’s Risk insurance policy’s coverage limits are not based on the Market or Resale value of the home.  A simple way to think of it is this, if this house or building were to burn down a day before construction is complete, how much would it cost to rebuild the entire thing?

For a New Ground Up project, the limits are based on the hard costs of construction (labor + material).  For a Remodel project it becomes a little more complicated as there are the new work construction costs as well as the cost to rebuild the existing structure in the event of a loss.  And to further complicate things, if you choose to protect the existing structure under the policy, most of the time its value is determined on an Actual Cash Value basis while the Remodel Costs are valued on a Replacement Cost basis.  For more info regarding the difference between these two, read this article.


While the cost of construction is important in figuring out the price of a Builder’s Risk insurance policy, the factor that has the greatest influence is the geographic location of the project.  A Builder’s Risk policy for a $300,000 new home build located in a non-brush area and close to a fire station & hydrant will come in under $1,000.  But if that same project is more than 5 miles from a fire station and in a brush area, the cost of that policy can easily be 20-30% more.  Also, coastal locations or areas that are prone to wildfires, tornadoes, hailstorms, and other natural disasters will see the cost for Builder’s Risk insurance rise.

Project Type

Another factor in determining the price of a Builder’s Risk insurance policy is whether a project is classified as New Construction or a Remodel.  New Construction projects are often cheaper because the insurance carrier knows that the risk they assume in the beginning phases of construction is very low.  After all, a concrete foundation isn’t that susceptible to fire and water damage.  Exposure to the insurance carrier rises as the different phases of construction are completed and this factors into the price the insurance carrier charges for the policy.

With a Remodel project, the insurance carrier is starting the policy off with significant exposure because there is already a structure in place.  Also, the scope of the remodel significantly affects the price of the policy.  If it is mainly a cosmetic upgrade or basic remodel, the policy premium will be lower.  If there are major structural changes such as moving load-bearing walls or adding stories then the price of the policy can increase significantly.

Construction Type

The type of construction materials used in the project also play a key role in the cost of the policy.  The higher the quality of material, the better it can withstand certain perils.  For example, projects with fire-resistive materials such as concrete or masonry are more favorably rated.  Unfortunately, when it comes to residential construction, wood-frame is the most common type of construction material and, as we all know, wood burns, easily and quickly.  These projects will most often have the highest rates for a Builder’s Risk insurance policy.

Questions?  Give Us A Call!

We started out focusing on Builder’s Risk insurance policies and we’ve been doing them for years.  If you have a question or want a quote about an upcoming project, give us a call!  855-95-SHIELD.  We look forward to hearing from you!

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