Builders’ risk insurance is not homeowners’ insurance and it’s not liability insurance. It’s a type of insurance that specifically protects a building project from types of damage that these projects are particularly vulnerable to: fire, vandalism, wind damage, theft etc. Builders’ risk insurance can be held either by the contractor or the owner of the property.

If you’re building a home and you already own the property the home is being built on, you should either have it written into the contract that your contractor has builders’ risk insurance, or purchase the insurance yourself. The insurance company that insures your present home may be able to provide you with some insurance for your vacant building project, but this coverage is likely to be quite limited and is probably not true builders’ risk insurance. For instance, it may not cover vandalism or theft of building materials, and may only cover fire under limited circumstances. Be sure to work with an insurance company that specializes in covering builders’ risk, and ensure that you thoroughly understand what’s covered and what isn’t.

Builders risk insurance policies vary widely in what they cover, so be sure to think about your specific needs. Basic policies likely won’t cover damage due to earthquake or flood, or loss of equipment left on the job site, but if any of these events are particularly likely due to location or other factor, it should be possible to purchase broader coverage and have them covered.

Builders’ risk insurance terminates when the project is finished. Work with both your builders’ risk insurance company and the company that will provide homeowners insurance when the building is occupied to ensure that there is no break in insurance coverage.