Builder’s Risk vs General Liability: Insurance Coverage Differences Commercial Projects Need to Understand

Choosing the right insurance coverage for a commercial construction project is no longer a checkbox exercise. In 2026, rising material costs, tighter project timelines, and increased claims activity have made coverage gaps far more expensive than most owners and contractors anticipate.

Two of the most commonly misunderstood policies are builder’s risk insurance and general liability insurance. While both are essential, they serve very different purposes. Confusing the two or assuming one replaces the other can expose a project to significant financial risk.

This guide explains the differences between builder’s risk and general liability insurance, what each policy covers, where exclusions typically apply, and how they work together to protect owners, developers, and contractors on commercial construction projects.

Understanding Construction Insurance in Commercial Projects

Construction projects involve layered risk. Physical assets, third-party exposure, workers on-site, and contractual obligations all create distinct insurance needs. No single policy covers everything.

Builder’s risk and general liability insurance form the foundation of most commercial construction insurance programs, but they address different risk categories. Understanding where each policy applies is critical to preventing coverage gaps during construction.

What Is Builder’s Risk Insurance?

Builder’s risk insurance is a first-party property policy designed to protect the physical assets of a construction project while work is in progress. It covers damage to the structure under construction and certain materials associated with the project.

This policy is typically purchased by the project owner or general contractor and remains in place from the start of construction until completion or handover.

What Builder’s Risk Insurance Typically Covers

Builder’s risk insurance commonly covers:

Buildings and structures under construction
On-site construction materials
Materials in transit or temporary storage
Temporary structures such as scaffolding or site-built trailers
Physical damage caused by fire, wind, theft, vandalism, or certain weather events

Optional endorsements may extend coverage to soft costs, debris removal, expediting expenses, or specific project risks.

Common Builder’s Risk Exclusions

Despite its broad scope, builder’s risk insurance does not cover everything. Common exclusions include:

Design errors or professional negligence
Faulty workmanship itself (resulting damage may be covered)
Employee theft
Flood and earthquake damage unless specifically endorsed

Understanding these exclusions is essential when structuring a project insurance program.

What Is General Liability Insurance?

General liability insurance is a third-party liability policy that protects against claims made by others for bodily injury, property damage, or personal injury arising from construction operations.

This policy responds when a contractor’s activities cause harm to someone else or their property, not damage to the project itself.

What General Liability Insurance Covers

General liability insurance typically covers:

Third-party bodily injury
Damage to third-party property
Legal defense costs related to covered claims
Advertising or personal injury claims

General liability insurance is essential for contractors operating on active construction sites where public exposure, adjacent properties, or shared workspaces increase risk.

What General Liability Insurance Does Not Cover

General liability insurance generally excludes:

Damage to the insured’s own work or property
Employee injuries (covered under workers’ compensation)
Professional errors or design-related claims
Physical damage to the structure under construction

These exclusions often surprise stakeholders who assume general liability insurance provides broader protection than it does.

Key Differences Between Builder’s Risk and General Liability Insurance

Although both policies are critical, they address fundamentally different risks.

Coverage Area	Builder’s Risk	General Liability
Coverage Type	First-party property	Third-party liability
Protects	Physical project assets	Claims from others
Applies To	Damage to the project	Injury or damage caused to others
Active Period	During construction	Ongoing business operations
Common Purchaser	Owner or general contractor	Contractors and subcontractors

Builder’s risk protects what you are building.
General liability protects against whom you might harm while building it.

Why Commercial Projects Need Both Policies

Relying on one policy to fill the role of the other creates dangerous gaps. A fire damaging framing materials is a builder’s risk claim. A pedestrian injured by falling debris is a general liability claim.

Large commercial projects frequently involve overlapping exposures where both policies may be triggered by a single event, each responding to different aspects of the loss. Coordinating coverage terms, limits, and endorsements is critical to avoiding disputes and delays during a claim.

Explore our commercial property risk assessment services to see how we help determine the right coverage structure for your construction project.

Our Property Risk Assessments

Policy Duration and Coverage Transitions

Builder’s risk insurance typically terminates once construction is complete, occupied, or formally accepted. At that point, permanent property insurance must take over to avoid a coverage gap.

General liability insurance remains active year-round, regardless of project status, and continues to protect contractors beyond project completion for covered occurrences.

Selecting the Right Coverage Structure

Commercial construction projects vary widely in scope, risk profile, and contractual structure. Insurance programs should be tailored based on:

Project size and value
Construction duration
Location-specific risks
Contractual insurance requirements
Use of wrap-up programs such as OCIP or CCIP

Poor coordination between builder’s risk and general liability policies is a common source of uncovered losses and claims disputes.

Key Takeaways for Builder’s Risk vs General Liability Insurance

Understanding the distinction between builder’s risk and general liability insurance is essential for managing risk on commercial construction projects.

Builder’s risk insurance protects the physical project during construction
General liability insurance protects against third-party injury and property damage
Neither policy replaces the other, and both are required for comprehensive protection
Coverage gaps often arise from exclusions, timing issues, or poor policy coordination
Properly structured insurance programs reduce claims friction and financial exposure

AMPR Consulting Helps Close Insurance Coverage Gaps

At AMPR Consulting, we help owners, developers, and contractors identify insurance gaps and vulnerabilities before they become costly claims issues. Our team evaluates coverage structures, policy coordination, and claim exposure across builder’s risk, general liability, and wrap-up programs.

By aligning insurance strategy with real-world project risk, we help stakeholders avoid delays, disputes, and unnecessary financial loss. Reach out to AMPR to learn how we support complex construction insurance and claims strategies.

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