Are These the Same Thing? Yes and No. The Jargon-Free Guide.
Two Names, One General Idea, but a Critical Difference in Who Buys It.
Builder’s Risk and Course of Construction are often used interchangeably to describe insurance for a structure that is being built. They both cover the property from risks like fire, theft, and vandalism during construction. The critical difference is who is buying the policy. A Builder’s Risk policy is a commercial policy purchased by the contractor. A Course of Construction policy is a personal lines policy purchased by the homeowner who will be living in the house.
Why a Homeowner Building a House Needs a Different Policy Than the Contractor.
Your Risks Are Different. Your Policies Should Be Too.
The contractor and the homeowner have two very different sets of risks. The contractor’s Builder’s Risk policy is designed to protect their business interests: their materials, their equipment, and their commercial liability. The homeowner’s Course of Construction policy is designed to protect their personal interests: the growing structure that is their future home, their personal liability for the property, and the eventual transition into a standard homeowners policy.
Course of Construction: The “Homeowners Policy for a House That Isn’t Built Yet.”
It Protects Your Dream from the Ground Up.
A “Course of Construction” policy is a beautiful thing. It starts as a policy that primarily covers the building materials and the structure as it goes up. It also includes personal liability coverage for the property owner. As the house nears completion and you move in, the policy is designed to seamlessly convert and blossom into a full, standard homeowners (HO-5) policy, without any gaps in coverage. It is a policy that grows along with your home.
Builder’s Risk: The Commercial Policy That Protects the Contractor’s Materials and Liability.
It’s Their Business Insurance, Not Your Personal Safety Net.
A “Builder’s Risk” policy is a commercial insurance product. Its primary purpose is to protect the general contractor’s financial interest in the project. It covers their investment in the lumber, the drywall, and the other materials on the job site. It also provides liability coverage for their own business operations. It is an essential policy for the builder, but it is not designed to, and will not, protect the personal liability or the long-term interests of the homeowner.
Theft of Copper Pipes from a Job Site: Who’s Policy Pays?
The Question of Ownership is Key.
This is a classic construction site scenario. If a pallet of copper pipes that the builder just purchased is stolen from the job site, the loss would be covered by the contractor’s Builder’s Risk policy, as it is their business property. However, if the pipes had already been installed in the house, the theft would likely be covered by the homeowner’s Course of Construction policy, as the pipes are now considered part of the homeowner’s structure.
How a “Course of Construction” Policy Seamlessly Converts to a Homeowners Policy.
No Gaps, No Hassle.
The magic of a Course of Construction policy is the conversion. When the construction is complete and you receive your “certificate of occupancy,” you simply call your insurance agent. They will then endorse the policy, converting it from a builder’s policy into a full-fledged homeowners policy. This is a seamless transition that ensures you don’t have a dangerous gap in coverage between the day construction ends and the day your regular homeowners insurance begins.
Don’t Rely on Your Builder’s Insurance. Here’s Why You Need Your Own.
The Most Dangerous Assumption a Homeowner Can Make.
Many homeowners make the massive mistake of assuming their builder’s insurance will protect them. It won’t. The builder’s policy protects the builder. If a visitor comes to your property to see the progress, trips, and sues, they are going to sue you, the property owner. The builder’s liability policy will not cover you. You absolutely must have your own Course of Construction policy from day one to protect yourself from the unique liability risks of owning a construction site.
The Liability Gap: What Happens if a Visitor Gets Hurt on Your Unfinished Property?
You Own the Land. You Own the Risk.
My friend was building a home and let his parents visit the job site on a Sunday when the crew was gone. His father tripped on some construction debris and was seriously injured. Because my friend owned the property, he was the one who was sued. The builder’s insurance provided zero coverage. It was a devastating financial and emotional nightmare that could have been completely avoided if he had his own Course of Construction policy with its crucial personal liability protection.
One Covers the Structure. The Other Covers the Business of Building the Structure.
The Purpose Defines the Policy.
This is the simple, core distinction. A homeowner’s Course of Construction policy is designed to protect a personal asset: the emerging structure that will become your home. A contractor’s Builder’s Risk policy is designed to protect a commercial enterprise: the business of constructing that building. While they both cover the “sticks and bricks,” their underlying purpose and the parties they are designed to protect are completely different.
The Critical Insurance You Need Before You Ever Break Ground.
The First Foundation You Should Pour is a Financial One.
Before the first shovel ever hits the dirt on your new home, you must have your own Course of Construction policy in place. Your lender will require it, and your common sense should demand it. It is the financial foundation of your entire project. It protects your massive investment from fire, theft, and weather, and it protects your entire financial future from the huge liability risks of owning an active construction site. Don’t start building without it.