How Builder’s Risk Insurance Protects Your Rebuild: LA Wildfire

A foreman wearing an orange vest and a hard hat on a radio, looking up at a worker in a crane, working at a high risk level

Senior Content Strategist

July 9, 2025 12:40 PM PT

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If you’re rebuilding your home after a wildfire, you’ll quickly discover that regular homeowner’s insurance doesn’t fully protect a property under construction. Builder’s risk insurance can fill this gap and is often required by lenders or contractors.

This guide explains what builder’s risk insurance is, how it works, and what wildfire survivors in California need to know before starting a rebuild.

What Is Builder’s Risk Insurance?

Builder’s risk insurance is a specialized property policy that covers your home during construction or major renovation. It protects against risks such as fire, theft, vandalism, and certain weather events that could damage the structure, building materials, or equipment during the rebuilding process.

After a total or major loss, most homeowner’s policies will not cover fire, theft, or other damage to the structure or materials during repairs or reconstruction. That’s why builder’s risk insurance, or course of construction coverage, is considered essential for any wildfire survivor planning a rebuild. It can shield them from another disaster or financial complication during the recovery process.

What Does Builder’s Risk Insurance Cover?

At its core, builder’s risk insurance provides property coverage for your home while it’s being built or substantially repaired. Typical covered events include fire, wind, theft, and vandalism. If specifically added, certain soft costs, such as architectural fees, loan interest, or lost rental income, are also covered.

Covered items usually include:

The structure under construction or repair
Building materials, fixtures, and appliances that will become permanent parts of the home, even if they haven’t been installed yet
Materials stored onsite, and in some cases, materials stored offsite or in transit (ask about this specifically)
Some policies may cover temporary structures, such as scaffolding.
The structure under construction or repair

However, there are important limits and exclusions:

Usually NOT covered:

Liability for injuries or accidents on site (this requires a separate liability or workers’ comp policy)
The contractor’s tools and equipment
Landscaping, trees, or shrubs
Flood or earthquake damage (unless added separately )
Your personal belongings or household contents
Mold or pollution (unless specifically endorsed)
Damage from faulty design, planning, materials, or workmanship
Undamaged or existing structures for partial rebuilds. Parts of the home that are left standing are usually not covered unless specifically endorsed.

Builder’s risk policies are custom to the needs of the project. Coverage, exclusions, and policy limits vary widely by insurer. Always request a sample policy and review the endorsements carefully. If cabinets or appliances have been built for you but remain off-site, such as at the factory, verify that your policy extends coverage to these materials. Some insurers require these to be scheduled or endorsed by name.

Builder’s Risk vs. Liability Coverage

A builder’s risk policy covers a property, not a legal liability. If someone is injured on your property during construction, you could still be sued. After a total loss, your original homeowner’s insurance may be canceled or suspended, so you may need to purchase a separate liability-only policy just to cover the land and foundation until your rebuild is finished.

If your lender, the Small Business Administration, or local officials require proof of liability insurance during the rebuilding process, clarify with your agent exactly what is needed. Builder’s risk insurance is strictly a type of property insurance. Whenever you think of liability, consider third-party litigation or being sued by someone. You need both types of coverage during a rebuild.

Tips for managing liability:

Maintain or secure a separate liability policy for your property, especially if your homeowner’s policy is dropped.
Require your contractor and their subcontractors to carry their own general liability and workers’ compensation insurance and request proof of coverage naming you as an additional insured.
Consider an umbrella policy if you have substantial assets that need protection.

Who Should Take Out the Policy?

Either the homeowner or the contractor can purchase the builder’s risk policy, and each option has its pros and cons. Many experts recommend that the builder or general contractor take out the policy, as they are familiar with the project’s limits and can more easily manage changes or extensions. However, always make sure that you are named as an additional insured, along with your lender.

If the builder owns the policy and is fired mid-project, coverage may end immediately. If you own the policy, you control coverage and extensions but must coordinate closely with your builder and lender.

Always confirm who is responsible for insurance in your contract and insist on being named on all relevant policies. If you have a mortgage, the bank must be listed as a mortgagee.

How Long Does Builder’s Risk Coverage Last?

Builder’s risk insurance is designed to last for the expected duration of the project. It’s common for wildfire rebuilds in California to take anywhere from 12 to 24 months, especially when many homes are lost at once. Most builder’s risk policies are sold in 12-month increments, but you can often extend the policy or buy a longer term up front if you expect delays. Renovations would not take as much time.

Some delays may be caused by supply chain issues, labor shortages, or adverse weather conditions. Always ask your insurer if they allow extensions and what the associated costs are.

Coverage usually ends when:

Construction is complete, and you move back in
The home is put to its intended use (even if you’re just storing items in the garage)
The project is abandoned, or the contractor is replaced (if the contractor owns the policy)

To avoid gaps in coverage, coordinate closely with your insurance agent regarding transition dates and start your homeowner’s policy as soon as you move your personal property into the rebuilt home.

What Does Builder’s Risk Insurance Cost?

Expect to pay about 1–5% of the total construction value for builder’s risk insurance. For example, a policy on a $400,000 home might range from $4,000 to $20,000 for the duration of the project. Actual costs may be lower for smaller or volunteer-led projects.

It’s often better to buy more coverage time upfront than to risk needing a costly extension. Ask about minimum earned premiums and refund policies if you finish early. Volunteer-built or policy-based solutions that cover only materials may cost significantly less, since labor costs are not added in.

Builder’s risk premiums depend on:

The total value of the rebuild (including materials and labor)
Project length and scope
Location (high-risk wildfire zones may be more expensive)
Whether the policy is for a total rebuild or a major renovation

How to Get Builder’s Risk Insurance

To get started:

Talk to your insurance agent or broker.
Not all companies offer builder’s risk insurance, so you may need to work with a specialty or independent agent.
Gather project details.
Construction timeline, estimated cost, contractor info, plans, and permits.
Ask for sample policies and check exclusions.
Make sure coverage includes off-site materials and soft costs and that wildfire is not excluded.
Compare your options.
Consider endorsements for flood, earthquake, or higher theft limits if needed.
Confirm you and your lender are named on the policy. Request a certificate of insurance.

Special Considerations for Wildfire Survivors

Partial vs. Total loss: If you’re repairing a partially damaged home, insurers may require a structural engineer’s report to confirm the remaining structure is sound. It can be more challenging and sometimes more expensive to get builder’s risk coverage for partial renovations than for total rebuilds.
Reusing your foundation: Most carriers will insure rebuilds on existing slabs if they’re certified as safe by an engineer, but coverage for the foundation itself is usually excluded.
Switching back to homeowner’s insurance: Your insurer will require proof of completion and an occupancy permit. Make sure there’s no gap between the builder’s risk policy ending and the homeowner’s insurance starting.
Code upgrades: In California, ask your agent about code upgrades or “ordinance or law” coverage, which may be needed to meet new building codes after a wildfire.

For more information, visit United Policyholders’ website or watch their webinar on Builders Risk Insurance here.