What are soft costs in builders risk insurance?

Soft costs are the non-construction expenses that keep accruing when a covered loss delays a project: additional architect and engineering fees, loan interest, real estate taxes, permit and legal fees, insurance premiums, and marketing or leasing costs. Base builders risk covers the hard cost of rebuilding but not these, so soft costs are added by endorsement.

Are soft costs and delay-in-completion the same thing?

They overlap but are not identical. Soft costs cover continuing expenses like interest and fees during a delay. Delay in completion focuses on lost income such as rents the project would have earned. Many programs combine both, and both are only triggered by a covered physical loss, not ordinary schedule slippage.

What endorsements should I add to a course-of-construction policy?

The most common valuable add-ons are soft costs, delay in completion, flood and earthquake where exposed, ordinance or law, off-site and transit limits, testing coverage, debris removal, and coverage extensions for scaffolding and temporary structures. Which to add depends on the project's financing, location, and complexity.

Soft Costs, Delay-in-Completion & What to Add to a Course-of-Construction Policy

Q: What is delay-in-completion coverage?

Delay in completion (sometimes called delayed opening or business income for builders risk) pays for lost income and continuing expenses when a covered physical loss pushes back the project's completion date. It typically covers lost rents, lost business income, debt service, and soft costs during the extended construction period.

By Tamir Lerner · Builders Risk Insurance Pros · Updated July 22, 2026

Quick answer: A base course-of-construction (builders risk) policy pays to rebuild the physical structure after a covered loss, but not the money you keep bleeding while the job sits idle. Soft costs coverage picks up continuing expenses like loan interest, extra architect fees, taxes, and permits. Delay-in-completion coverage picks up lost income such as rents. Both are add-ons, both are triggered only by a covered physical loss, and on a financed project both are often essential.

When a fire or storm halts a construction project, the repair bill is only part of the damage. The clock keeps running. Interest on the construction loan still accrues, the architect has to redraw, permits get pulled again, and the rents or sale proceeds you were counting on slide months into the future. A base builders risk policy does not touch any of that — it rebuilds the building and stops. Closing that gap is what soft costs and delay-in-completion coverage are for, and they are among the most valuable endorsements you can add.

What are soft costs?

In construction, costs split into two buckets. Hard costs are the physical build — labor, materials, and the structure itself. Soft costs are everything else it takes to get a project done: professional fees, financing, and administrative expenses. When a covered loss delays the project, many soft costs keep accruing even though no work is happening. Soft costs coverage reimburses those extra, delay-driven expenses, which commonly include:

Additional loan interest and other financing charges during the extended period.
Extra architect, engineering, and design fees to redraw or re-inspect.
Real estate taxes and assessments that continue during the delay.
Additional insurance premiums to keep coverage in force longer.
Renewed permits, legal, and accounting fees.
Advertising, marketing, and leasing commissions that must be re-spent.

Importantly, soft costs coverage is only triggered by a covered physical loss — a fire, storm, or other insured peril that causes the delay. It does not respond to ordinary schedule slippage, weather days, or supply-chain lags with no physical damage behind them. IRMI's explanation of soft costs is a useful reference on the distinction.

What is delay-in-completion coverage?

Delay in completion — also marketed as delayed opening, delayed completion, or business income for builders risk — addresses the lost income side of a construction delay. Where soft costs cover expenses that keep flowing out, delay in completion covers revenue that fails to flow in because the project opens late. After a covered physical loss extends the schedule, it typically responds to:

Lost rental income the completed building would have generated.
Lost business income for an owner-occupied facility that opens late.
Continuing debt service and fixed charges during the extended period.
Soft costs, where the endorsement bundles them together.

For a developer with a construction loan and pre-leased tenants, this is often the difference between a manageable setback and a deal that falls apart. Lenders on income-producing projects frequently require it.

Soft costs vs. delay in completion at a glance

	Soft costs	Delay in completion
What it covers	Continuing/extra expenses	Lost income & revenue
Typical items	Interest, fees, taxes, permits	Lost rents, business income, debt service
Trigger	Covered physical loss causing delay	Covered physical loss causing delay
Who needs it most	Any financed project	Income-producing / pre-leased projects

The two overlap and are frequently written together. The key point is that both are optional endorsements, both need a covered loss to trigger, and both carry their own limits and a waiting period (a deductible expressed in days) before benefits begin.

Other endorsements worth adding to a course-of-construction policy

Beyond soft costs and delay, a well-built course-of-construction program is shaped by a handful of endorsements matched to the project. The base ISO builders risk form (part of the commercial property program described by Verisk/ISO) is intentionally lean; these fill it out:

Flood and earthquake

Both are standard exclusions. If the site is in a flood zone or seismic region, add them by endorsement or standalone policy. Lenders often demand flood coverage as a funding condition, and you cannot buy it once a storm is imminent.

Ordinance or law

After a partial loss, current building codes may force you to rebuild to a higher standard, demolish undamaged portions, or absorb increased costs. Ordinance or law coverage funds that code-upgrade gap, which the base valuation ignores.

Off-site storage and transit

Materials are frequently damaged or stolen before they reach the site. Adequate off-site and in-transit sub-limits, sized to how you actually stage materials, keep those losses covered.

Testing coverage

On projects with mechanical, electrical, or HVAC systems, damage can occur during start-up and testing. Testing coverage extends protection through that commissioning phase, which some base forms restrict.

Debris removal, temporary structures, and pollutant cleanup

Confirm meaningful limits for debris removal after a loss, coverage for scaffolding, forms, fencing, and construction trailers, and a reasonable allowance for cleanup of pollutants released by a covered event.

Building something financed, leased, or complex?
We tailor course-of-construction coverage with the right soft costs, delay, and catastrophe endorsements so a covered loss doesn't sink the pro forma. Build your policy at buildersriskinsurancepros.com Call (818) 356-8150

How to decide what to add

Match the endorsements to three questions. First, how is the project financed? A construction loan makes soft costs and lender-required coverages close to mandatory. Second, will it generate income? Pre-leased or owner-occupied revenue projects need delay in completion. Third, where and how is it built? Flood zones, seismic regions, complex systems, and heavy off-site staging each point to specific endorsements. Work those answers with a broker who quantifies the limits — a soft costs limit that is too low is nearly as painful as having none.

The bottom line

Base course-of-construction insurance rebuilds the structure; it does not protect the economics of your project. Soft costs coverage keeps the carrying costs from piling up during a covered delay, and delay-in-completion coverage replaces the income you would have earned. Add the catastrophe, ordinance, storage, and testing endorsements your specific project calls for, and a serious jobsite loss becomes a covered interruption rather than a financial unwind.

Builders Risk Insurance Pros is a division of Thrive Risk Management. This article is general information, not legal or insurance advice. Endorsement availability, triggers, waiting periods, and limits vary by carrier and form. Review your specific policy and needs with a licensed agent.