A general contractor is the named insured on a builder's risk policy for a custom home. The property owner asks why their own homeowner's policy is not enough. Which statement is the BEST explanation?

Explanation

A standard homeowner's form insures a finished dwelling and its contents. A house being built or substantially renovated is either excluded outright or capped at a fraction of the dwelling limit, and materials not yet installed are usually covered only under a small building-materials or off-premises sublimit. Closing that gap is exactly what a builder's risk policy is written for: it covers the structure, the fixtures and the materials against physical loss for the construction period and then ends. (a) states the opposite of the exclusion, and it is the belief that leaves an owner uninsured in the middle of a build. (b) invents a dollar trigger; nothing makes builder's risk turn on contract size, though a construction lender will usually require it whatever the size. (c) mixes up the two families of insurance: injuries to third parties and the lawsuits they bring are liability cover, whereas both homeowner's property cover and builder's risk answer physical damage to the property itself.