Delay in Start-Up and Soft Cost Coverage in Builders Risk for 2026 Projects

A builders risk policy is usually described by what it protects: the structure rising on site, the materials staged in the yard, the work in progress. That description is accurate, and it is incomplete. Physical damage is only the first casualty of a covered loss. The second — quieter, slower, and frequently larger — is time.

When a fire, a windstorm, or a water event damages a project, the crew rebuilds what burned or blew away. Meanwhile the calendar keeps moving. The completion date slides. The tenant who was going to occupy in March now occupies in September. The construction loan underwritten for eighteen months runs to twenty-four. Property taxes accrue on a building that produces nothing. None of that is physical damage — and none of it responds under the physical-damage section of the policy. It responds, if at all, through two extensions that too many owners treat as afterthoughts: delay in start-up (DSU) and soft cost coverage.

What the time-element extensions actually do. Builders risk pays to repair the work. DSU and soft cost coverage pay for the consequences of the delay that repair creates. That distinction is the whole point. Restoration — the labor and materials to rebuild — sits on the direct-damage side. The time-element side responds to what the delay costs the project’s economics: lost rents or revenue the finished asset would have produced, extended interest on the construction loan, additional design and engineering fees, re-permitting and re-inspection, extended general conditions, and the insurance and real estate taxes that pile up over an idle schedule.

Two features set these coverages apart from everything else in the policy. First, the trigger is derived, not direct — there is no time-element recovery without a covered physical loss underneath it. A flood that was excluded produces no DSU payment, however long it stalls the job. Second, the deductible is measured in time, not dollars. Most forms carry a waiting period expressed in days — often 30, 45, or 60 — and that clock must run before a single dollar of delay loss attaches. A short delay that clears the waiting period pays nothing; a long one pays from the first day past it.

Measuring the delay is its own discipline. The recoverable period is not “how long the repair took.” It runs, as J.S. Held frames it, from the date the project would have been completed had no loss occurred to the date it is actually completed — provided the insured pursues repairs with due diligence and dispatch. That reads clean on paper and turns adversarial in practice. Projects re-sequence. Non-covered work interleaves with covered repair. Slippage unrelated to the loss creeps into the same window. The owner sees one continuous delay; the carrier sees a period it will fund and a period it will not. The gap between those two readings is where these claims are won or lost — and it is why the scheduling discipline you keep before a loss becomes leverage after one.

Why 2026 enlarges the exposure. The delay side of builders risk grows precisely as lead times stretch, and 2026 has stretched them severely. Substation-class transformers now run 75 to 110 weeks, generator step-up units 100 weeks and beyond, and medium-voltage switchgear 52 to 80 weeks — two to four times pre-pandemic norms, with no meaningful normalization expected before 2028. Labor compounds it: the industry needs an estimated 349,000 additional workers in 2026, and 45 percent of firms already report labor-driven delays.

Consider the mechanism. Before, when a covered loss destroyed a critical component, you reordered it and lost a few weeks. Now you reorder it and lose the better part of a year, because the replacement joins the back of a queue measured in quarters. The same covered event that once produced a modest delay now produces a long one — and a time-element limit that was adequate against a short slip is badly exposed against a long one. Hold this distinction: the tariff conversation is about what materials cost, and this one is about what waiting costs. They are not the same exposure, and one line of coverage does not answer for the other.

Scheduling the coverage before you bind it. Soft costs are not covered as a lump sum. They are scheduled — itemized on a worksheet, category by category, so the limit reflects what an actual delay would actually cost. Understate the loan interest or omit the extended general conditions, and the shortfall surfaces at the worst possible moment. Who carries the coverage matters just as much: the owner owns the lost-revenue and financing exposure, while the contractor owns the liquidated-damages exposure the same delay may trigger under the construction contract. Naming the right insured, for the right loss, is not paperwork — it is control.

This is where our four-step process does its quiet work. Strategic Discovery surfaces the real completion economics and the true lead-time runway. Risk Assessment tests the waiting period and the soft-cost schedule against a realistic long-delay scenario. Solution Design builds the limits and the named insureds to match. Ongoing Optimization revisits all of it as the schedule — and the supply chain — keep moving. A builders risk policy that protects the structure but not the runway to open it is only half a policy, and the difference surfaces on the one day you cannot afford it to.

— Ryan Mefford, President & Risk Advisor