If you’re starting a construction project, whether it’s building a new home, renovating an old one, or taking on a commercial site, you’ve probably heard two terms thrown around a lot in builder reports or while checking a contractor license: Builders Risk Insurance and Contractors All Risk Insurance.

They sound similar. They cover construction. They protect against losses.
So… what’s the difference?

Here’s the good news: once you break it down in simple language, it’s actually very easy to understand. And knowing the difference can save you from unexpected costs, disputes, and budget shocks down the line.

Let’s walk through it, conversationally and clearly.

Why Insurance Matters So Much in Construction

Construction is one of the riskiest industries in Australia. The insurance sector reports that:

• Nearly 30% of building projects experience delays due to weather, theft, or damaged materials.
  
• Tool and material theft from worksites costs the industry over $50 million annually.
  
• Storm-related damage is rising year after year, especially in NSW and QLD.
  

With so many moving parts, such as materials, machinery, labour, subcontractors, and site conditions, proper coverage isn’t optional but essential.

But here’s where many homeowners and even small contractors get confused:
Which insurance covers what?

Builders Risk Insurance: The Project-Based Shield

Think of Builders Risk Insurance as insurance for the building itself while it’s being built.

It covers the property under construction.

If a wall collapses, materials get stolen, or a fire damages the partly built home, this policy steps in.

Who usually buys it?

• Property owners
  
• Developers
  
• Sometimes builders (depending on the contract)
  

What does it cover?

It typically protects against:

• Fire
  
• Storm damage
  
• Theft of building materials
  
• Vandalism
  
• Accidental damage to the structure
  
• Damage to materials stored onsite or in transit
  

What it doesn’t cover:

This is important!
It usually does NOT cover injuries, accidents involving workers, or damage caused by defective workmanship.

Think of it this way:

Builders’ Risk = protects the physical project.

If the unfinished home is damaged, this insurance takes care of repairs or rebuilding costs.

Contractors All Risk Insurance: The Contractor’s Safety Net

Now let’s look at the second one.

Despite the similar name, Contractors All Risk Insurance covers a much broader range of risks. This is why many builders and subcontractors prefer it.

It acts like a “complete project protection + liability protection” package.

Who usually buys it?

• Contractors
  
• Subcontractors
  
• Construction companies
  

What does it cover?

This policy generally includes BOTH:

1. Material Damage Section

This part overlaps with Builders Risk, covering damage to:

• Works under construction
  
• Materials and equipment
  
• Temporary structures like scaffolding
  
• Machinery
  

2. Third-Party Liability Section

This is the big difference.

It covers:

• Injury to third parties (visitors, neighbours, delivery staff)
  
• Damage to neighbouring properties
  
• Accidents caused by contractor activities
  

For example:

• A worker accidentally damages the neighbour’s fence
  
• A passerby slips near the worksite and gets injured
  
• Machinery hits a parked vehicle
  

Builders’ Risk won’t cover any of this.
Contractors All Risk Insurance will.

This is why the keyword Contractors’ All Risk Insurance shows up so much in construction compliance discussions and builder reports, especially when verifying a valid contractor license, because it’s essential for protecting against lawsuits, injury claims, and liability costs that could cripple a business.

What it doesn’t cover:

• Intentional damage
  
• Faulty workmanship (but it may cover resulting damage)
  
• Professional negligence (that needs professional indemnity)
  

Key Difference in One Line

If you want the simplest possible distinction:

Builders’ Risk = protects the building.
Contractors All Risk = protects the building and the contractor.

Or even simpler:

Builders Risk → property-only.
Contractors All Risk → property + liability.

Which One Do You Need?

This depends on your role in the project.

If you’re a homeowner or developer:

You’ll usually need Builders Risk Insurance because you own the property. It protects your investment during construction.

If you’re a contractor or builder:

Contractors All Risk Insurance is your must-have policy. It protects your work and your risk exposure to third-party damages.

If you’re an MSME contractor:

Many MSME builders prefer Contractors All Risk Insurance because:

• It’s cost-effective
  
• It bundles liability and property damage
  
• It satisfies many contract requirements
  
• It makes them more competitive in tenders
  
• It reduces personal financial exposure
  

Do You Ever Need Both?

Yes, often.

On large projects, you’ll see:

• The owner holds Builders’ Risk Insurance
  
• The builder holds Contractors All Risk Insurance
  

This creates a full protection ecosystem covering both the property and liability on-site.

Common Mistake: Assuming One Covers Everything

A lot of people confuse the two and assume:

“If something goes wrong, insurance will cover it.”

But insurers reject thousands of construction claims every year due to the wrong type of policy being in place.

Understanding the difference ensures:

• No gaps
  
• No surprises
  
• No blame games
  
• No legal disputes
  

Final Thoughts

Builders’ Risk Insurance and Contractors’ All Risk Insurance remain two of the most important protections in the construction world, each with its own purpose.

If you’re building, renovating, or contracting:

• Builders’ Risk covers the project.
  
• Contractors All Risk covers the project + liability.
  

Knowing the difference isn’t just smart but also financially essential.

This blog does not constitute any legal advise.