Insurance Considerations
Insurance protects the project, the property, and the people involved.
Coverage requirements vary by state, lender, and project type.
Confirm requirements early with:
- Your insurance provider
- Your lender (if applicable)
- Your local building department
Insurance costs are typically calculated as a percentage of construction cost and should be included in your project budget.
Core Coverage Types
There are four primary insurance considerations:
No Insurance
Proceeding without insurance exposes the owner to significant financial risk.
If an injury or loss occurs and proper coverage is not in place, the owner may face claims for:
- Medical expenses
- Lost wages
- Legal costs
- Liability damages
Some states allow workers up to several years to file claims following an incident.
A Hold Harmless agreement may reduce risk, but enforceability varies by state and should be reviewed by an attorney.
Insurance is generally less expensive than defending a claim.
Builder’s Risk Insurance
Builder’s Risk is property insurance covering the structure while under construction.
It typically protects against physical loss or damage from events such as:
- Fire
- Vandalism
- Certain weather events
- Accidental damage
Coverage may be purchased by the owner or contractor.
Premiums commonly range from 0.25% to 0.65% of construction cost, depending on project size and location.
Policies vary — confirm what is and is not covered.
General Liability Insurance
General Liability protects contractors against third-party injury or property damage claims.
A third party is someone not directly affiliated with the project (e.g., neighbors, visitors).
Premiums often range from 0.24% to 0.62% of construction cost, depending on:
- Project type
- Contractor experience
- Location
Owners should verify that contractors carry adequate limits and provide certificates of insurance.
Workers’ Compensation
Workers’ Compensation covers employee injuries sustained on the job.
The contractor is typically responsible for carrying this coverage.
Premiums range from 6.6% to over 36% of labor cost, depending on the trade risk classification.
Coverage helps protect both the worker and the owner from injury-related liability.
Why This Matters
Insurance is not simply administrative.
It protects:
- Financial exposure
- Project continuity
- Legal position
- Lender compliance
Confirm coverage limits before construction begins.
Underinsured projects create risk that surfaces during crisis.
🔒 (See Planning – Project Budget for cost integration.)💡 TIP: Understand your potential exposure; talk with your insurance representative and your loan officer to make sure that you have the right coverage.
What Comes Next
Insurance protects against financial loss.
Permits authorize work.
Codes define minimum standards.
But protection alone does not create control.
Control begins in Planning — where scope, diagrams, budget, and schedule are defined deliberately.