and if the general contractor receives the funds directly from a claim, theoretically, he/she could abscond with that benefit. It is far safer for the property owner to obtain the builder's risk policy, because they already own the building, even while it is under construction. If something happens to the under-construction project, then they should be the beneficiary and control how it is spent. The general contractor ends up receiving the funds in the end, to rebuild damage, but this method gives the control of the insurance benefit to the owner. Alternatives If the project involves renovations or additions to an existing building, the owner's existing property insurance may cover the work under construction, eliminating the need for builder's risk insurance. (Policies vary.) However, in the case of new buildings under construction on vacant sites, the owner may not have an existing policy that provides coverage. References Construction documents Types of insurance