Builders Risk Coverage Form

A builders risk coverage form is a property insurance policy that covers a building under construction or renovation against physical loss or damage from the time work begins until the project is complete and occupied. The standard Insurance Services Office form is CP 00 20. Coverage applies to the structure itself, foundations, installed materials, supplies and equipment stored on or within 100 feet of the site, and temporary structures. Most policies are written on an inland marine form rather than a standard commercial property form, which allows more flexible, project-specific terms.

Think of builders risk coverage like a health insurance policy for a building: it protects the structure from its first day of construction until it is ready to stand on its own with a permanent property policy.

Coverage Automatically Ends at Specific Milestones

The CP 00 20 form terminates coverage when one of three events occurs first: 90 days after construction is substantially complete, 60 days after any portion of the building is occupied, or when the property is put to its intended use. Failing to arrange permanent property insurance before builders risk terminates creates an uninsured period that could be catastrophic if a fire, storm, or other covered event occurs.

Projects must typically be less than 30% complete to qualify for a new builders risk policy at standard terms. Projects that are further along require additional underwriting review and may carry higher premiums or more restrictive terms.

The Policy Is Written on an All-Risk Basis with Specific Exclusions

A builders risk policy covers all causes of physical loss or damage except those specifically excluded. Common exclusions include flood, earthquake, earth movement, employee theft, mechanical breakdown, design defects, and wear and tear. Several of these exclusions, particularly flood and earthquake, can be added back through endorsements at additional cost.

Whether to buy back flood and earthquake coverage depends on project location. A building under construction near a river or in a seismically active area faces meaningfully higher exposure than a project on dry, stable ground. The base policy does not respond to those perils regardless of how severe the loss is.

The Coverage Limit Is Set at Completed Value from Day One

You set the builders risk limit at the total completed value of the structure, not at the value of work completed to date. The reason is straightforward: if a fire destroys the foundation and framing in week three of a $5 million project, rebuilding requires $5 million, not $300,000. The completed value approach ensures full coverage is available at every stage of construction.

Policies are also available on a reporting form basis for large contractors with multiple simultaneous projects. On that arrangement, you report current values monthly or quarterly, and the insurer adjusts coverage accordingly. Single-project owners typically use a one-time declaration of completed value.

Sources:
https://www.insurancexdate.com/insurance-forms/CP/CP-00-20/
https://www.thehartford.com/insights/construction/builders-risk-insurance
https://www.procore.com/library/builders-risk-insurance
https://usassure.com/resources/articles/what-does-builders-risk-insurance-cover