They may catch fire, be damaged by high winds, or fall victim to other force majeure.
It typically does not cover perils such as earthquake, flood or hurricane damage unless the policy has been specifically endorsed to do so.
[6] Builder's risk coverage may be necessary to show proof of insurance to comply with local city, county, and state building codes and is often required as a condition to many contracts.
Many architects believe that it is the property owner who should have the builder's risk policy, because they have already paid for the improvements to their land, and if the general contractor receives the funds directly from a claim, theoretically, he/she could abscond with that benefit.
However, in the case of new buildings under construction on vacant sites, the owner may not have an existing policy that provides coverage.