How Does Builders Risk Insurance Work for Texas Construction Projects?

What Does Builders Risk Insurance Cover?

Builders risk insurance covers a building while it is being built or heavily renovated. It usually insures the structure, the materials that will become part of it, and temporary works like scaffolding and forms. Most policies cover every cause of loss they don't exclude, which usually includes fire, wind, hail, theft and vandalism.

Unlike a policy on a finished building, builders risk is built around a value that grows every week. The limit is usually the project's estimated completed value: what the finished building costs to build, not counting land.

For a short overview, see our builders risk and construction page.

What Does Builders Risk Usually Not Cover?

Builders risk pays for sudden, accidental damage. It usually doesn't pay to fix a mistake, replace worn parts or insure the contractors' equipment. These are the most common gaps:

• Faulty work, design or materials. Most policies exclude the cost to fix the defect itself. Many still cover damage that results from it, but that wording varies a lot. See construction defect.
• Wear and tear, rust, rot and slow deterioration.
• Mechanical or electrical breakdown. Some builders risk policies exclude equipment that simply breaks down, while others cover it. Ask which yours does (IRMI).
• Contractors' tools and equipment. Cranes, loaders and tools are usually insured on the contractor's own contractors equipment policy.
• The existing building on a renovation, unless the policy adds it.
• Flood and earthquake, which are often excluded or given a smaller sublimit.
• Some theft and dishonest acts, such as theft by your own employees or some thefts from unattended vehicles.

Who Should Buy Builders Risk: The Owner or the Contractor?

Either can, and the construction contract usually decides. The standard AIA owner-contractor agreement puts the job on the owner unless the parties choose to shift it to the contractor (AIA Contract Documents).

Owners often buy it themselves to control the limits, the deductibles and the claim. When the contractor buys it, the cost is often passed back to the owner anyway. Either way, the owner, the general contractor and the subcontractors are usually all insureds, and the lender is usually named as mortgagee or loss payee.

Should You Choose a Completed Value or Reporting Form?

For a single project, completed value is usually the simpler choice. A completed value form sets the limit at the finished value from day one, and the premium is priced knowing the value starts low and grows. A reporting form has you report the value of completed work, often monthly, and the reported amount is what's insured (Triple-I).

On either form, tell your insurer when change orders raise the project cost. Some builders risk forms include a condition that reduces a claim when the insured value is too low, much like coinsurance on a property policy.

What Are Soft Costs and Delay in Completion Coverage?

They pay for what a covered loss costs you beyond the physical repairs. Builders risk pays to rebuild damaged work. Unless soft cost or delay coverage is added, it usually doesn't pay for the extra months of interest, taxes and lost rent when the opening date slips.

Soft cost and delay coverage commonly include items like these (IRMI):

• Extra interest on the construction loan.
• Real estate taxes and insurance premiums for the extra months.
• Architect, engineering, legal, permit and bond fees.
• Advertising and leasing costs.
• Rent or income lost because of the later opening, often called loss of rents or rental value.

Two details matter most. A policy pays only for the cost types it lists, so compare its list with your project budget. And these coverages often start only after a waiting period counted in days, which can take a large bite out of a claim (IRMI).

How Are Theft, Materials in Transit and Off-Site Storage Handled?

Theft is a constant concern on job sites. Copper, appliances and tools left on open sites are easy targets. Many policies set a lower theft limit, a higher theft deductible, or security conditions you must meet.

Materials don't always sit on site. Windows may wait in a supplier's yard, and steel may be on a truck. Ask whether the policy covers property in transit and in off-site storage, and at what limit. The 2017 AIA insurance exhibit no longer requires this coverage, so it can fall through the cracks (IRMI).

Underwriters often ask about site security habits like these:

• Perimeter fencing with locked gates after hours.
• Site lighting and cameras, ideally monitored.
• Locked containers for copper, wire, tools and appliances.
• Delivering high-value items close to when they'll be installed.
• A sign-in log and regular after-hours checks.

Read any security condition closely. If the policy requires a fence or a guard and it's missing on the night of a theft, the claim can be reduced or denied.

How Do Wind, Hail and Named Storms Affect Texas Projects?

A partly built building is weak against wind. Open walls, unfinished roofs and loose materials can turn a strong storm into a big loss. Texas also had more major hail events than any other state in 2025, according to the Insurance Information Institute.

Many Texas builders risk policies have a separate wind and hail deductible, and coastal projects often have a named storm deductible. These are often a percentage of the insured value, not a flat amount. Check what the percentage is applied to: the full completed value or the value at the time of the loss.

Get named storm terms in writing before hurricane season. When a storm is approaching, insurers often stop binding new coverage, which is called a binding moratorium.

Building on the Coast: Windstorm Inspections and TWIA

In the 14 first-tier coastal counties and parts of Harris County east of Highway 146, private policies often exclude wind and hail. There the Texas Windstorm Insurance Association (TWIA) is the insurer of last resort, generally after a private insurer declines (TWIA, declination rules). TWIA also writes builders risk policies, one building per policy, for projects that meet its eligibility rules (TWIA). To qualify, a building generally needs a windstorm certificate of compliance showing it meets the windstorm building code. TWIA's exceptions are for residential properties, so commercial buildings generally need the certificate (TWIA).

Most of Houston is outside that area, so most Houston projects buy wind coverage from private insurers. For coastal projects, plan the inspections before the first slab is poured:

1. Ask your general contractor and engineer who will handle windstorm compliance. The Texas Department of Insurance suggests asking your contractor how it will meet the requirements.
2. Have a TDI-appointed inspector or engineer inspect the work while it's underway. Those inspections are recorded on TDI's inspection verification forms (the WPI-2-BC series), and the right version depends on when construction began (TDI forms).
3. When the work passes, TDI issues a WPI-8 certificate of compliance.
4. If the work wasn't inspected during construction, a Texas licensed professional engineer can inspect the finished building and apply for a WPI-8-E. TDI notes this is harder and may cost more.

TWIA accepted applications for its own WPI-8-C certificates only from January 1, 2017, to May 31, 2020. Since June 1, 2020, TDI has issued all certificates of compliance (TWIA).

Is Flood Covered While You Build?

Often only partly, or not at all, unless you ask. Many builders risk policies exclude flood or give it a smaller sublimit with its own deductible. Standard property policies for the finished building exclude flood too.

Check your construction contract as well. The standard AIA insurance exhibit says the builders risk policy may not exclude flood or earthquake (IRMI). A policy that leaves flood out may not meet that contract.

For the finished building, the NFIP offers up to $500,000 for a non-residential building and $500,000 for contents. New policies usually have a 30-day waiting period, unless the policy is bought in connection with making, increasing, extending or renewing a loan (FloodSmart). Larger buildings often add private or excess flood coverage. An elevation certificate can help price it.

How Does Builders Risk Work for a Renovation?

Renovation projects can be insured, but the existing building usually needs its own coverage. Builders risk forms are built for new work. Many cover the existing structure only if it's added, and some only at actual cash value, which subtracts wear (IRMI). On a big renovation, that can leave a large gap.

Often the cleaner setup is to keep the building on your commercial property policy at replacement cost and insure the new work under builders risk. The standard AIA exhibit also asks the owner to insure the existing structure at replacement cost during remodeling (IRMI).

Before work starts:

• Tell your property insurer about the project, its scope and its dates.
• Ask whether the property policy has exclusions or conditions for renovation work.
• Make sure the two policies agree on who covers what, so a loss to old and new work isn't disputed.
• If tenants stay open, check that loss of rents fits a longer closure.

One bit of good news: under the standard property form, a building under construction or renovation isn't considered vacant (IRMI). Still, tell your insurer if the building will sit empty during the work.

What Happens When the Building Is Finished or Partly Occupied?

Builders risk is meant to end. Many forms end coverage a set number of days after the building is occupied, in whole or in part, or put to its intended use, or after construction is complete, unless the insurer agrees otherwise in writing (FC&S). The word "occupied" is often not defined.

If a tenant wants to open early in a finished suite, get permission to occupy in writing first. Otherwise, coverage for that part, or more, could end.

1. Ask the builders risk insurer how the policy defines completion and occupancy, and when it ends.
2. Bind permanent property coverage at replacement cost, with loss of rents, to start that same day.
3. Line up general liability for the finished building, and an umbrella if lenders or tenants require one.
4. Add equipment breakdown for new HVAC, electrical and elevator systems.
5. Plan coverage for finished but unleased space, where the vacancy clause can apply later.
6. Send the lender new evidence of property insurance before the builders risk certificate expires.
7. If the project runs late, extend builders risk before it lapses.

What About Testing and Start-Up?

Systems are tested before opening, and testing is when breakdowns and fires can happen. Many policies limit or exclude testing, especially "hot testing" of production machinery. The 2017 AIA exhibit requires testing and start-up coverage for building systems, such as electrical, HVAC, plumbing and sprinklers, but not hot testing (IRMI). If your project has process equipment or a commercial kitchen, ask how testing is covered.

What Should Your Contracts and Lender Require?

Waiver of Subrogation

Subrogation is your insurer's right to go after whoever caused a loss it paid. Construction contracts often include a waiver of subrogation, so the parties look to the property insurance instead of suing each other. AIA's standard general conditions include one, limited to losses covered by property insurance (IRMI). Before you sign, confirm your policies allow the waiver.

Lender Requirements

Construction lenders usually spell out builders risk terms in the loan documents. Common lender requirements include a completed value limit, the lender as mortgagee or loss payee, a maximum deductible, soft cost or delay coverage, named storm and flood terms, and notice before cancellation. Send the loan's insurance section to your agent before you bind. Our lender requirements guide covers the details.

Contractors' Liability and Certificates

Builders risk covers property, not injuries. Your general contractor and subcontractors should carry their own general liability and auto coverage, plus any workers' compensation your contract requires. Your contract can require them to name you as an additional insured, including for finished work under products-completed operations. Large projects sometimes use a wrap-up program instead.

A certificate of insurance is only a summary. Under Texas law, a certificate is not a policy and doesn't change the coverage (Tex. Ins. Code §1811.152). Ask for the additional insured endorsement itself.

Texas also limits what you can shift to contractors. Under the Texas Anti-Indemnity Act, a construction contract generally can't require additional insured coverage for your own negligence when it couldn't require indemnity for it (Tex. Ins. Code §151.104). So keep your own general liability in force while you build. This is general information, not legal advice; have a construction attorney review your contracts.

What Do Underwriters Ask About a Construction Project?

They want to know what you're building, who's building it, where, and how the site is protected. A complete submission usually gets more insurers to quote and fewer surprises later.

1. Project address, type and total completed value, with hard and soft costs broken out.
2. Construction start and completion dates, and the schedule.
3. Construction type, number of stories and square footage.
4. The general contractor's name, experience with similar projects and loss history.
5. Site security: fencing, lighting, cameras and guards.
6. Flood zone, distance to the coast and, if coastal, the windstorm inspection plan.
7. For renovations: the age and value of the existing building, and your current property policy.
8. Projected rents or income, and the loan's soft cost and delay requirements.
9. Planned occupancy dates, including any partial openings.
10. The construction contract's insurance section and the lender's requirements.

Send what you have, even if it's incomplete. When you're ready, request a quote or read how we work.

Questions Owners Ask

Sources

1. IRMI: Builders Risk: New AIA Requirements — AIA 2017 insurance exhibit: testing, transit, existing structures, flood
2. IRMI: Key Considerations When Buying Builders Risk Coverage — Faulty work, waiting periods, existing structures
3. IRMI: Soft Costs and Rental Value Coverages Denied for Additional Named Insured — Why owners should be the named insured
4. Triple-I: Construction Contractors — Completed value vs. reporting
5. Texas Department of Insurance: What you need to know about windstorm inspections
6. Texas Department of Insurance: Completed construction certificates
7. TWIA: Windstorm Certification
8. TWIA: Declination requirement — Proof of declination from an authorized insurer
9. TWIA: Builder's Risk Submission in the Agent Portal (job aid v2.0, Aug. 29, 2025) — TWIA builders risk: one building per policy; eligibility rules apply