On a custom build or a major renovation, a large share of the budget exists as property before it exists as a house. Stone is quarried and cut. Windows are fabricated. Millwork is built in a shop. Appliances ship from Europe. A range, a slab, a set of doors or a glazing package can each be a meaningful fraction of the project, and for weeks or months that property sits in a truck, a container, a port, a warehouse or a garage.
Property insurance follows location and ownership. On a project, both of those keep moving. Here’s how to keep coverage attached to materials that aren’t a building yet.
Start with ownership, because everything else follows from it
Insurance responds to an insurable interest. Before you ask which policy covers a crate, ask who owns the crate.
Three common patterns on an expensive residential project:
The owner buys direct. You contract with the stone yard, the appliance dealer or the overseas fabricator, pay a deposit, and take title at some point defined by that purchase agreement. Your interest is at risk from then on, and a contractor’s policy owes it nothing.
The contractor buys and bills. The contractor purchases materials, carries them on their books, and bills you as work is put in place or on a schedule of values. Until you’ve paid, the contractor generally holds the interest. Their builders risk or installation floater is the natural home for it. Once you’ve paid, the picture shifts.
A subcontractor supplies and installs. The cabinet maker or the glazier owns the goods until installation is accepted. Their installation floater, if they carry one, is the policy in play, and it typically ends at acceptance.
Losses here rarely turn on an exclusion. They turn on three parties each assuming one of the other two was insuring the crate.
When title passes, and what shipping terms actually do
Shipping terms are contract language that fixes the moment risk of loss moves from seller to buyer. Domestic supply agreements commonly put that either at the seller’s loading dock, so the buyer bears the journey, or at the buyer’s delivery point, so the seller does. International shipments use a separate set of standardized trade terms that do the same job across a much longer chain of inland carriage, ocean freight, customs and final delivery.
Two practical points for a homeowner.
First, the freight company’s liability isn’t insurance on your goods. Common carriers carry cargo liability, which is generally limited by tariff or contract to a figure per pound or per shipment that has nothing to do with the value of what was inside. A pallet of hand cut tile weighs very little and is worth a great deal. Leaning on the trucking company’s liability is how a five figure loss turns into a three figure recovery.
Second, the terms are negotiable and people ignore them constantly. On a project with several six figure material orders, reading the risk of loss clause in each purchase agreement is an afternoon’s work, and it tells you whether that leg needs a policy at all.
That’s contract and commercial law, and what follows from it is a coverage question. Neither is legal advice, and on a large import order it’s worth having the purchase agreement reviewed by counsel.
Inland marine, in plain terms
Property insurance splits roughly into property that stays put and property that moves. Inland marine is the family of coverages built for the stuff that moves, or that sits somewhere other than a fixed insured location. Transit, temporary storage, and property in the course of installation all live there.
The forms that matter on a residential construction project:
Builders risk transit and storage extensions. Many builders risk forms extend the project coverage to property in transit to the site and at a temporary offsite location, each subject to a sub limit. Those sub limits usually sit far below the project limit, and they’re frequently left at a default that nobody adjusted for a seven figure materials order. Check this number first. It’s the one most often wrong.
Installation floater. An inland marine form written specifically for materials, machinery and equipment that will be installed in a structure. It typically covers the property in transit, at temporary storage and at the site until installation is complete and the owner accepts it. Usually bought by the installing contractor, and usually sized to that contractor’s typical job rather than to yours.
Transit or cargo coverage. Written on the shipment itself. It’s the answer for a single high value import leg where neither the builders risk extension nor an installation floater reaches far enough.
Ask the same four questions about whichever form is in play. What’s the sub limit, what’s the deductible, does it cover the property at a named offsite location or any offsite location, and on what basis is a loss valued.
Offsite storage is where the coverage quietly stops
A surprising amount of an expensive project’s material spends time somewhere other than the job site. A rented storage unit, the owner’s other property, a supplier’s warehouse, a millwork shop, a container in a driveway two streets over.
Each of those is a different underwriting situation, and forms vary on all of this:
- Whether the location has to be specifically named on the policy.
- Whether there’s a distance limit from the project site.
- Whether the location has to be enclosed, locked, alarmed or under the control of a third party.
- Whether property at a location the insured owns is treated differently from property at a commercial storage facility.
- Whether sprinkler protection at the storage location is a condition.
There’s a related trap. A storage unit rented in the owner’s name can pull the property toward the homeowners policy’s off premises personal property limit, which is generally a fraction of the contents limit and was never meant for building materials. Don’t let a project manager’s parking decision pick your policy for you.
Custom and long lead items: the exposure is the calendar
On an item with a nine month lead time, the replacement cost is the smaller half of the loss. The larger half is what happens to the schedule when the crate arrives destroyed.
Standard builders risk forms generally exclude delay, loss of use, loss of income and consequential damages. Soft cost coverage, which can pick up things like additional construction loan interest, extended design and engineering fees, permit re-filing and additional general conditions, is typically a separate purchase and typically doesn’t get bought on a residential project.
If a single long lead item is on the critical path, ask three questions in writing:
- What is the sub limit that applies to this item while it’s in transit and in storage?
- Is the valuation basis replacement cost, or something narrower for a one of a kind piece?
- Is any delay or soft cost coverage available, and at what limit?
The same logic runs through salvaged, antique and matching materials on a historic property, where a destroyed item can’t be replaced at any price and the loss becomes a mismatch across the whole elevation.
Deductibles, and the mess of four policies pointing at one crate
A transit loss on a big residential project can plausibly touch:
- the freight company’s cargo liability, limited by contract,
- the supplier’s own property or transit coverage,
- the installing contractor’s installation floater,
- the project’s builders risk transit extension,
- and, if the item has arrived and been installed, the homeowners or high value home policy.
Each has its own deductible, its own valuation basis and its own exclusions. Left alone, that produces a claim where the recovery is well short of the loss and the argument runs for months.
Three decisions fix most of it, and all three get made before the first delivery.
Decide which policy is primary for transit and for storage, and write it into the construction contract. The insurance article should say who insures materials before installation, on what form, at what limit and with what deductible.
Size the sub limit to the largest single shipment. The average shipment is beside the point. What matters is the value at risk in one truck or one container on one day.
Match the deductible to the item. A deductible that makes sense against a total structure loss can be bigger than an individual material loss, which means the coverage never responds to the losses that are actually likely.
Contractor responsibility versus owner responsibility
The clean way to think about it is by stage.
Before the owner pays. The contractor or supplier holds the interest and should be insuring it. Your protection is contractual. Require them to carry transit and installation coverage at a stated limit, and get evidence of it before the order goes in.
After the owner pays, before installation. This is the gap. Deposits and progress payments move money before they move possession. If the contract says nothing, you’ve paid for property you don’t control and may not be insuring. An owner purchased builders risk with a transit and storage extension earns its keep right here.
After installation and acceptance. The material becomes part of the structure, and the structure’s coverage picks it up, builders risk for now and the homeowners form later. Where exactly that handoff happens is the subject of moving from builders risk back to homeowners.
For the wider question of which policy a renovation belongs on, see homeowners versus builders risk on a major renovation. For what drives builders risk pricing generally, builders risk insurance cost drivers and what is builders risk insurance cover the fundamentals.
A short list to run before the first big order ships
- Who holds title at each stage, in writing, for each major material order.
- The risk of loss clause in each purchase agreement, read rather than assumed.
- The transit sub limit and the offsite storage sub limit on whatever builders risk is in force.
- Whether the offsite storage location has to be named, and whether yours is.
- The deductible against the value of the largest single shipment.
- Whether the installing contractor carries an installation floater, and its limit.
- Whether delay or soft cost coverage exists, and whether the critical path item needs it.
- Where scheduled items that already exist, such as art or antique fixtures being reinstalled, are insured during the work. See scheduling jewelry and valuables.
Where to go from here
The service page for this work is high value home renovation insurance. For a ground up build, custom home insurance is the better starting point.
If you want the construction contract’s insurance article read against the builders risk sub limits before the container leaves the port, request a coverage review.