Who Buys Builder's Risk Insurance on a Project?

By Wyatt Cooper · Published October 22, 2026 · 6 min read

Key takeaways

Builder's risk insures the work itself against loss while it is being built; whoever the contract names buys it, and on AIA-based private jobs that is usually, but not always, the owner.
The contract can put it on the contractor instead, often with the owner paying the premium, especially on cost-plus work.
On federal jobs the contractor is responsible for materials delivered and work performed until the whole job is accepted, so the contractor is the one protecting against that loss.
Whoever buys it, size it to the full value of the work, name the owner, contractor and every tier of sub as insureds, and settle who pays the deductible before the first loss.

Whoever the construction contract says. AIA says that on projects using its documents the owner usually, but not always, buys it; the insurance exhibit can place it on the contractor, and the owner then typically reimburses the premium. On federal work the contractor carries the risk of loss until acceptance. Either way, the policy should cover the full value of the work and insure the owner, contractor and subs.

What builder's risk covers

Builder's risk is property insurance on the project under construction: the building, the materials on site and, depending on the policy, materials stored elsewhere or in transit. AIA describes it as "property insurance that insures against loss to the project before it is complete" (AIA Contract Documents). It is not liability insurance: a fire that destroys the framing is a builder's risk claim; an injury to a passer-by is a general liability claim.

Because a loss hits everyone with money in the work, the policy should insure everyone. AIA's article says the insurance is to include the interests of "the owner, contractor, subcontractors, and sub-subcontractors in the project, and the interests of mortgagees as loss payees."

Who buys it, by contract

On AIA-based work, the property insurance terms moved out of the general conditions: the A201–2017 summary says many insurance provisions were removed from A201 and are now in an exhibit to the owner-contractor agreement. AIA's builder's risk article says that exhibit "requires either the owner or contractor to purchase" it, and that "usually, but not always, the owner will procure the property insurance for the project." When the parties decide the contractor is better placed to buy it, "the owner typically will reimburse the contractor for the premium, especially if the contractor is working on a 'cost-plus' basis."

Who buys builder's risk: what to look for in the contract you are signing
Contract	Where it is decided	Who usually ends up paying	What to confirm
AIA owner-contractor agreement (stipulated sum)	The insurance and bonds exhibit	Usually the owner; the exhibit can place it on the contractor	The box that says who buys it is filled in, and the amount
Cost-plus or GMP agreement	The insurance exhibit and the cost of the work	The owner, directly or through reimbursed premium	Whether the premium is a reimbursable cost or inside the fee
Design-build agreement	The design-builder's agreement and its insurance terms	Either party; the contract decides	That design-phase and construction-phase risks are both addressed
Federal construction contract	FAR 52.236-7, Permits and Responsibilities	The contractor, which bears the risk of loss until acceptance	Completed units the government accepted early, which leave the contractor's risk
Owner's own form contract	Its insurance article	Whoever it names; read it	That it doesn't leave the work insured by nobody

On federal work the rule is in the clause itself. FAR 52.236-7 says the contractor "shall also be responsible for all materials delivered and work performed until completion and acceptance of the entire work, except for any completed unit of work which may have been accepted under the contract." The clause does not name builder's risk, but it makes the contractor the one who loses if the work is destroyed before acceptance. For how the delivery methods themselves differ, see delivery methods compared.

A worked example: sizing the policy

Builder's risk worksheet: Larkspur Medical Office

Who buys it: The owner, as the insurance exhibit is filled in
Initial contract sum: $4,200,000
Approved change orders expected before completion: $180,000
Owner-furnished equipment the contractor installs: $250,000
Insured value: $4,200,000 + $180,000 + $250,000 = $4,630,000
Named insureds: Owner, contractor, subcontractors and sub-subcontractors; the construction lender as loss payee
Deductible: Settled in the exhibit: the party whose work caused the loss pays it, up to the deductible
Ends: When the owner's permanent property policy takes over at occupancy; the two are lined up so there is no gap

A fictional owner's builder's risk decision on a stipulated-sum job. The figures show the method, not typical values.

Two lines in the worksheet are where owners get caught. Leave out the owner-furnished equipment and $250,000 of the building is uninsured on the day it is set. And if the builder's risk policy ends at substantial completion while the permanent policy starts at occupancy, any days between are a gap; AIA notes property insurance "typically carries through until substantial completion and afterwards", so check both dates. See what substantial completion is.

Questions to settle before you sign

Who buys it, in which document, and is that box actually filled in?
What value is it written for, and does that rise with change orders and owner-furnished items?
Are the contractor, every tier of sub and the lender included, as the AIA article describes?
Who pays the deductible, and is it capped for a sub whose work caused the loss?
Does it cover materials stored off site or in transit, which you may be paying for on pay apps before they arrive?
On a renovation, is the existing building covered by your property policy or by the builder's risk?
When does it end, and when does your permanent policy start?

These are questions for your insurance broker and your contract attorney; the answers depend on the policy and the contract. The owner's guide walks through the rest of the owner's decisions on a job, and the AIA contract documents explainer shows where the exhibit sits.

The bottom line

The contract decides who buys builder's risk. On AIA-based private jobs it is usually the owner; it may be shifted to the contractor, often with the owner paying the premium; on federal work the contractor carries the risk until acceptance.

Whoever buys it, write it for the full value of the work, insure every party with money in the work, and line its end date up with your permanent policy.

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Sources

How to Manage Risk Using Construction Insurance & Bonds – Part 2: Builder's Risk — AIA Contract Documents. Read October 22, 2026.
Summary: A201–2017, General Conditions of the Contract for Construction — AIA Contract Documents. Read October 22, 2026.
FAR 52.236-7, Permits and Responsibilities — Acquisition.gov. Read October 22, 2026.

Questions

Does the owner or the contractor buy builder's risk insurance?

Whoever the contract names. AIA says that usually, but not always, the owner buys it on projects using its documents; the contract can place it on the contractor instead.

If the contractor buys builder's risk, who pays for it?

Often the owner, in the end. AIA notes the owner typically reimburses the contractor for the premium, especially on cost-plus work. On a stipulated-sum job the contractor prices it into the bid.

Who is insured under a builder's risk policy?

It should insure everyone with an interest in the work. AIA describes the owner, contractor, subcontractors and sub-subcontractors as insureds, with mortgagees as loss payees.

When does builder's risk coverage end?

When the policy says, often at substantial completion, occupancy or a set date. AIA notes property insurance typically carries through until substantial completion and afterwards. Line the end date up with the owner's permanent property policy so there is no gap.

Who carries the risk of loss on a federal construction job?

The contractor. FAR 52.236-7 makes the contractor responsible for all materials delivered and work performed until completion and acceptance of the entire work, except completed units already accepted.