Most developers buy Builders Risk insurance only a handful of times during their careers. As a result, many assume every Builders Risk policy provides essentially the same protection.

It doesn’t.

At Kavana Construction Risk Institute, we’ve found that the largest coverage gaps rarely occur because insurance wasn’t purchased—they occur because critical assumptions were never discussed before construction began.

Mistake #1: Insuring the Purchase Price Instead of the Replacement Cost

A vacant lot worth $3 million doesn’t determine the amount of Builders Risk insurance needed.

The policy should generally reflect the cost to reconstruct the project if it were destroyed during construction.

We’ve seen developers underestimate reconstruction costs simply because they anchored on the acquisition price rather than the actual cost to rebuild.

Mistake #2: Waiting Until Construction Starts

Insurance should be part of pre-construction planning.

Waiting until permits are issued often reduces carrier options and increases underwriting pressure.

Mistake #3: Assuming Theft Is Automatically Covered

Copper, tools, temporary materials, and equipment are often subject to specific limitations or conditions.

Understanding these provisions before materials arrive onsite is essential.

Mistake #4: Forgetting Soft Costs

Architectural fees. Engineering. Permit expenses. Interest carry. Lost rents.

Delay-related costs can become some of the largest financial exposures after a major loss.

Mistake #5: Buying Based Solely on Premium

The cheapest policy often becomes the most expensive if it excludes the claim you eventually have.

Developers should compare coverage, exclusions, deductible structure, carrier financial strength, and claims reputation—not just price.

Kavana’s Perspective

Builders Risk should never be treated as a commodity purchase.

Every project deserves a coverage review tailored to its construction type, financing structure, and risk profile.