Insurance for construction projects in North Carolina

What builder's risk insurance covers

Builder's risk is a temporary property insurance policy that covers a structure while it is under construction. The policy attaches at groundbreaking (or at the start of demolition for a renovation) and terminates at substantial completion or occupancy.

Covered perils typically include:

• Fire and lightning
• Wind and hail
• Theft and vandalism
• Collapse during construction
• Water damage (non-flood)
• Materials in transit and on-site storage

Builder's risk does not cover flood, earthquake, contractor tools and equipment (those require inland marine), or professional liability. Workers' compensation is handled separately.

Who buys builder's risk in NC

Either the property owner or the general contractor typically carries builder's risk, whoever has the greater financial interest in the project. Lenders financing construction almost always require evidence of builder's risk coverage before disbursing funds.

In NC residential construction, builders often carry a blanket builder's risk policy covering multiple projects. For a custom home or an owner-managed project, the owner may purchase the policy directly. Understanding who is responsible for this coverage, and verifying it, is essential before construction begins.

Major renovations and builder's risk

This is where the most common gaps occur. A homeowner with an existing homeowner's policy who begins a significant renovation may find that their policy excludes or limits coverage during construction. Contractors working on the property typically exclude the structure itself from their GL policy.

For renovations where a significant portion of the structure is open or exposed, a full gut renovation, an addition, or a roof replacement, a builder's risk policy or a renovation endorsement should be in place. Notifying your existing carrier about a major renovation is also important; some policies suspend or limit coverage during construction.

Soft costs coverage

A fire during construction doesn't just destroy the framing, it also means re-engaging your architect, extending permits, paying additional carrying costs on a construction loan, and potentially re-bidding subcontractors. Soft costs endorsements on builder's risk policies can cover these indirect losses from a covered event.

Transitioning to the permanent policy

Builder's risk ends at occupancy. The permanent homeowner's, commercial property, or landlord policy must be bound before that date. There is no grace period, the coverage gap between builder's risk expiration and the permanent policy binding is a real exposure. IronHaven can help coordinate the transition so there is no window where the property is uninsured.

Cooper's take

Frequently asked questions