Why Builders Risk Insurance Is Essential for New Construction Projects

Protecting Your Texas Build from the Ground Up

Whether you're building a single-family home, a retail center, or a commercial office park, construction is inherently risky. Equipment theft, weather events, vandalism, and accidental damage can all derail progress and inflate costs.

“It’s not just you: construction really is risky business,” wrote Construction Dive senior editor Joe Bousquin, noting that the industry historically has the third-highest number and cost of legal filings among all U.S. business sectors and construction firms had the worst average credit score.

That’s why builders risk insurance — also known as course of construction insurance — is a must-have for any new construction project.

“A properly designed builders risk program will protect your investment in your construction project not only for property damage repair costs but also for business interruption losses and higher soft costs," says the International Risk Management Institute (IRMI). 

For Texas builders and property owners, the stakes are even higher. From hurricane exposure along the Gulf Coast to hailstorms in the Panhandle and theft in urban centers like Houston and Dallas, our state brings both opportunity and elevated risk.

“Builders risk insurance protects the owner of a construction project for losses caused by many reasons, including fire, explosion, hurricane, fire, flood, vandalism, and others perils,” explains the IRMI.

What Is Builders Risk Insurance?

Builders risk insurance is a specialized property policy designed to protect buildings and materials during the construction or renovation phase. It typically covers:

• The structure under construction.
• On-site materials, equipment, and supplies.
• Materials stored off-site or in transit.
• Temporary structures like scaffolding or fencing.

Covered perils often include:

• Fire and lightning.
• Windstorms and hail.
• Theft and vandalism.
• Explosion.
• Some types of water damage (e.g., burst pipes).
• Hurricanes, tornadoes, and other Acts of God.

Important note: Floods and earthquakes are often excluded from builders’ risk policies but can often be added via endorsement.

What It Doesn’t Cover

While builders’ risk is comprehensive, it’s not all-inclusive. Common exclusions include:

• Liability for worker injuries (handled by workers’ comp or general liability policies).
• Faulty design, materials, or workmanship.
• Wear and tear or normal settling.
• Contract disputes or financial penalties.
• Earthquake and flood (unless specifically added).

That’s why it’s critical to work with an experienced broker who can tailor your coverage to fit the exact risks your project faces.

Why It Matters in Texas

Texas is one of the fastest-growing construction markets in the country — the Austin-Round Rock-Georgetown metro area saw a 20 percent rise in construction employment last year -- and one of the riskiest.

According to the National Equipment Register, construction site theft causes more than $1 billion in annual losses nationwide. Texas consistently ranks in the top five states for jobsite theft, particularly in high-growth metro areas.

In addition, Texas construction projects face:

• Hurricane exposure along the coast.
• Hail and windstorms in Central and North Texas.
• Wildfires in dry summer months in West and Central Texas.
• Rapid development, which brings more complex scheduling, subcontractor use, and risk exposure.

Most lenders in Texas now require builders risk coverage before they issue financing, especially for residential and commercial projects valued over $100,000. And even when it’s not mandatory, going without it can be a costly gamble.

“Between 2016 and 2020, there were about 4,300 fires annually on construction sites that required local fire departments to respond. These fires resulted in an average of $376 million in direct property damage each year,” says Texas Regional Bank. “Obtaining a builder’s risk insurance is the most effective approach to safeguard your financial interest when funding or physically constructing a construction project.

Real Costs — and Real Coverage

Builders risk insurance in Texas is surprisingly affordable compared to the value it protects. On average, premiums run about 1 to 5 percent of total construction costs.

For example:

• On a $500,000 residential build, a builders’ risk policy might cost between $5,000 and $20,000.
• On a $5 million commercial build, the cost could range from $50,000 to $200,000 depending on the project’s complexity, location, and risk profile.

Compare that to the cost of replacing stolen copper wiring, a vandalized HVAC unit, or a fire-damaged framing job — and the policy quickly pays for itself.

Who Should Carry the Policy?

Builders risk insurance can be purchased by either the property owner or the general contractor, depending on the structure of the project. The key is that the policyholder must have an “insurable interest” — a financial stake in the property.

The following parties often carry or are named on a builders’ risk policy:

• Property owners.
• Homebuilders and developers.
• General contractors.
• Subcontractors (as additional insureds).
• Architects.
• Investors or lenders.

If you’re unsure who should carry the coverage, a broker can help structure a policy that aligns with your contracts and protects all parties.

What Can Be Added?

Many Texas builders customize their policy to reflect their unique risks. Optional endorsements (coverage add-ons) may include:

• Flood or earthquake insurance.
• Soft costs coverage for permit fees, design expenses, and interest on construction loans.
• Debris removal and pollution cleanup.
• Protection for scaffolding, construction forms, and other temporary structures.
• Business income or rental income loss due to delays.
• Equipment breakdown.

These add-ons can be critical in commercial or mixed-use builds where delays lead to lost revenue.

Risk Is Rising

Construction site theft is on the rise — with thieves targeting lumber, tools, generators, HVAC units, and copper.

In fact, the Wall Street Journal reported on July 11, 2025, that thieves were now targeting coppery by the truckload as the price of the metal, important to construction, is skyrocketing.

“Reports of copper theft from trucks are rising even faster than the price of the metal, which is used in products ranging from cars to construction materials,” said the publication. “Criminals increasingly have been targeting copper because of rising demand for the metal in fast-growing sectors of the economy such as renewable energy and data centers. Copper prices are up globally and have surged more than 35 percent in the U.S. this year.

Other risk issues on the rise:

• More than 90 percent of large construction projects experience cost overruns and delays, often due to unforeseen events like weather, delivery delays, or fire (McKinsey & Company).
• 43 percent of contractors say that weather delays significantly impacted their projects (Dodge Data & Analytics).

As supply chain issues continue and labor shortages persist, any setback can snowball into a costly delay.

Builders risk insurance helps prevent those setbacks from becoming financial disasters.

Dean & Draper: Helping Texas Build with Confidence

At Dean & Draper, we understand the unique challenges facing Texas construction professionals. Whether you’re building in Houston, Austin, Dallas, or Corpus Christi, our team of brokers can help you:

• Evaluate your project risks.
• Customize a builders’ risk policy for your scope and timeline.
• Ensure compliance with the lender, municipality, or contract requirements.
• Manage claims should something go wrong.

“With a builders’ risk policy, we can help make sure you aren’t left with costly building repairs, material replacements, and legal fees should damage affect your building site,” says Dean & Draper President and CEO.

With over four decades of experience serving the Texas market, Dean & Draper helps protect what you’re building — before the first brick is laid.

Contact Dean & Draper today to request a builders’ risk insurance quote tailored to your next construction project.

The recommendation(s), advice, and contents of this material are provided for informational purposes only and do not purport to address every possible legal obligation, hazard, code violation, loss potential, or exception to good practice. Dean & Draper Insurance Agency specifically disclaims any warranty or representation that acceptance of any recommendations or advice contained herein will make any premises, property, or operation safe or in compliance with any law or regulation. Under no circumstances should this material or your acceptance of any recommendations or advice contained herein be construed as establishing the existence or availability of any insurance coverage with Dean & Draper Insurance Agency. By providing this information to you, Dean & Draper Insurance Agency does not assume (and specifically disclaims) any duty, undertaking, or responsibility to you.  The decision to accept or implement any recommendation(s) or advice contained in this material must be made by you.