In California, “buyers risk vs general liability” isn’t just insurance jargon – it’s vital protection for businesses, contractors, and property owners alike. With wildfires, earthquakes, and litigious environments shaping our Golden State, understanding the difference can save you from financial stress and legal trouble.
Why It Matters in California
California faces unique risks: wildfires, earthquakes, theft at job sites, and sometimes complicated insurance laws. In 2024, wildfires caused over $4 billion in insured losses, spurring investigations and reforms by the California Department of Insurance . As a result, insurance rules are changing fast:
- The FAIR Plan (California’s insurer of last resort) increased commercial coverage limits to $20 million per building to help builders and small businesses.
- New laws require insurers to cover high‑risk areas more broadly, allowing them to raise premiums to manage wildfire and reinsurance costs .
For builders, contractors, and homeowners, knowing which policy covers what isn’t optional—it’s essential.
Builder’s Risk Insurance: What It Covers
Who buys it: Typically, the property owner or general contractor. It’s often required by lenders and mentioned in construction contracts.
What it covers:
- The actual building under construction.
- Materials, tools, and temporary structures (like scaffolding or trailers).
- Damage from fire, theft, vandalism, wind, hail, lightning—wildfires and earthquakes often need extra coverage.
What it doesn’t cover:
- Injuries to workers or visitors.
- Everyday liability claims (“someone tripped and fell”).
- Employee theft (unless added as an endorsement)
When it applies: From “groundbreaking” until the project ends—when the building is occupied or sold .
Why it matters in California: With construction costs so high—even a few weeks’ delay costs thousands—losing crucial materials or structures can derail budgets. In 2025, builders’ risk typically costs 1–5% of the project budget, depending on size, location, and coverage options.
General Liability Insurance: Your Everyday Protector
Who buys it: Contractors, sub-contractors, and often project owners—usually required by law, especially for licensed contractors .
What it covers:
- Injuries to non-employees (clients, visitors, delivery drivers).
- Damage to someone else’s property (e.g., a tool smashing your neighbor’s car).
- Some “personal and advertising” injuries like libel
What it doesn’t cover:
- Damage to your own worksite, building, or tools—that’s builder’s risk.
- Employee injury (requires separate worker’s compensation).
- Professional mistakes (requires professional liability policy)
Why it matters in California: Lawsuits and third-party claims are common here—someone slipping on your site could cost thousands in medical bills or legal fees. Having reliable general liability coverage is often legally required and smart business sense.
Side-by-Side Comparison: Builder’s Risk vs General Liability
| Aspect | Builder’s Risk | General Liability (GL) |
| Type | First-party (protects your own property) | Third-party (protects against others’ claims) |
| Protects | Building, materials, tools, temporary setups | People and property belonging to others |
| When in effect | Construction period only | Ongoing, including any time your business operates |
| Pays for | Repair/rebuild costs, clean-up, soft costs | Medical bills, legal defense, settlements |
| Typical cost | 1–5% of project budget | Depends on project size and risk, often bundled |
| Required by | Lenders, contracts | License law, clients, project bids |
Real-World Scenario: Builders in California
Imagine Jamie, a builder in Santa Clarita working on a new home. While cutting lumber, a sawdust-filled trailer is stolen—delaying the project.
- Builder’s risk covers the cost of replacing the trailer and lumber.
Later, a delivery driver trips over unseen cables on-site and breaks a wrist. - General liability handles the medical bills and any claim.
If Jamie only had one and not the other, either out-of-pocket costs or lawsuits could destroy the project—and reputation.
What California Laws Say in 2025
California’s Department of Insurance monitors construction coverage closely. Notable updates:
- AB 1339 (2025) requires a comprehensive study of availability and barriers for affordable housing—including builders’ risk and general liability gaps.
- The FAIR Plan expanded coverage limits, making it easier for builders to get high-value projects insured.
- New wildfire rules allow insurers to pass on reinsurance expenses—but only if they also serve high-risk areas, which means more available coverage in California.
This all supports stronger protection for businesses that invest in California’s future.
Choosing the Right Combo for Your Project
Do I need both?
Yes—especially in California. Builder’s risk saves your project; general liability shields your business and reputation.
When might I skip builder’s risk?
If it’s a small remodel and the owner’s existing property policy covers it. But that’s rare—don’t just assume.
Tips:
- Read contracts and lender terms—they’ll often require specific policies.
- Customize builder’s risk to include wildfire, earthquake, soft-cost delay expenses.
- Check GL limits—$1 million per incident is standard; more may be needed for larger projects.
Final Thoughts
Seeing the difference—builders risk vs general liability—is straightforward once you break it down:
- Builder’s risk = your building and materials, first-party coverage.
- General liability = injuries and damage to third parties, third-party coverage.
Looking ahead into 2025, California is making insurance more accessible, stronger, and transparent—especially in high-risk scenarios like wildfires and affordable housing. Understanding these protections helps you stay compliant, safe, and financially solid.
For everyone from single-home builders to affordable-housing developers, both types of insurance are essential tools—not just optional policies. They’re safeguards for your business, clients, and community.
