Construction · Insurance Term
Hard Costs
Definition
Hard costs are the direct, physical costs of building a project: labor, materials, equipment and the structure itself. On a builders risk policy, hard costs are usually the main amount insured, separate from soft costs like interest, fees and lost rent.
In Plain English
When you buy builders risk insurance, the insurer asks for the completed value of the project. That number is mostly hard costs: concrete, steel, framing, roofing, mechanical systems, finishes and the labor to install them. If a fire or windstorm damages the work, the hard cost coverage pays to rebuild what was lost.
Hard costs are different from soft costs, such as construction loan interest, architect fees, permits, and marketing. Soft costs often need their own limit or endorsement. A loss can also push back the finish date, and delay in completion coverage addresses the money lost from that delay.
Land value is generally not a hard cost for insurance purposes, because land does not burn. Leaving it out of the insured value helps keep the limit accurate.
Not sure how your policy handles this? Have us review it, or get a quote.
Example
Hypothetical: a developer builds a $6,000,000 retail building. The budget shows $4,800,000 in construction contract costs, $700,000 in soft costs and $500,000 for land. The builders risk hard cost limit would typically be based on the $4,800,000 construction value, with soft costs handled separately.
What to Watch For
- Base the hard cost limit on the full completed construction value, including change orders as they happen.
- Exclude land value from the insured amount unless your policy says otherwise.
- Confirm whether materials stored off site or in transit are included.
- Ask how soft costs and delay are handled so they are not left out by mistake.
Last updated October 14, 2026 · Primesure editorial team · How We Write