Who is responsible for builders risk: owner or contractor?
Construction contracts determine who buys builders risk insurance on any given project. Georgia law does not assign this responsibility, so when a contract is silent, both the owner and the contractor often assume the other party has coverage. That gap has ended projects in costly disputes over an uninsured loss.
What are the two main arrangements for builders risk coverage?
Owner-provided coverage is typical on larger or more complex projects. The property owner has the greatest financial exposure: they hold the land, carry the debt, and stand to lose the most if the partially built structure is damaged or destroyed. Commercial developers, municipalities, and institutional clients frequently purchase the policy themselves and name the general contractor as an additional insured.
Contractor-provided coverage is common on residential construction and smaller commercial jobs. The general contractor carries the policy, names the owner as an insured, and builds the premium into the project price. From the owner’s perspective the cost is embedded in the contract total rather than a separate line item.
Who should be named on a builders risk policy?
Regardless of which party buys the policy, it should name everyone with a financial stake in the project. That typically includes:
- The property owner
- The general contractor
- Any construction lender or bank financing the build
- Sometimes major subcontractors, depending on their scope and contract terms
A named insured has direct rights under the policy if a covered loss occurs. An interested party or loss payee, usually the lender, receives claim proceeds up to the amount of their financial interest.
What happens when a builders risk contract is silent on coverage?
Georgia law does not mandate which party must hold the policy, so the contract is the only document that settles the question. If a contract is silent and a fire, windstorm, or theft destroys work in progress, sorting out who should have insured the project can take longer than rebuilding it.
For example, a homeowner in Kennesaw contracts to add a second story to their house. The contract assigns builders risk coverage to the general contractor and names the homeowner as an insured. Halfway through framing, a fire causes $60,000 in damage to materials and completed work. Because the contract clearly assigned coverage and the homeowner is named on the policy, the claim is filed and paid without a coverage dispute. That outcome depends entirely on one clause being in the contract before work begins.
How does a loss payee differ from a named insured on a builders risk policy?
A named insured can file a claim directly and receive payment for the full scope of their loss. A loss payee, typically a lender or financial institution, is entitled only to claim proceeds up to the outstanding loan balance. For example, if a construction lender has advanced $200,000 on a project that suffers a $300,000 fire loss, the lender receives $200,000 as loss payee and the owner receives the remaining $100,000 as named insured. The distinction matters when structuring the policy at the contract stage.
How do I verify builders risk coverage before construction starts?
The construction contract should name the responsible party explicitly and require proof of coverage, a certificate of insurance, before work begins. Confirming that the policy is actually in force, not just promised, protects all parties at the contract stage rather than after a loss.
A free coverage review with a licensed advisor can identify which arrangement fits your project and verify the right parties are protected before construction starts.