Selling Guide

Published April 07, 2021

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What is builder's risk insurance and when is it required?

Builder’s Risk Insurance

When Fannie Mae purchases—under terms permitting—a mortgage that combines construction and permanent financing into a single transaction before the construction of the property improvements is completed, the property (and any partially completed improvements) must be covered by builder’s risk insurance. (This type of insurance was previously referred to as construction site insurance).

Builder’s risk insurance is a type of property insurance that is obtained for improvements that are being constructed, which protects against losses during the construction period that are the result of theft, vandalism, and acts of nature (including fire, flood, and wind damage). 

The amount of the builder’s risk insurance coverage must be equal to the original mortgage loan amount.

The builder’s risk insurance may be canceled after the borrower obtains property (and, if applicable, flood) insurance that meets Fannie Mae’s standard requirements after the improvements are completed or the borrower occupies the property (whichever comes first).

For additional information, see B7-3-05, Additional Insurance Coverage.

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