At the midpoint of 2025, one trend is abundantly clear: Builders must be as strategic about managing risk as they are about managing materials.

In Part I of our trend check-in, we explored how innovation is reshaping home construction. Now, we turn to a different kind of pressure—market volatility, rising insurance costs, and growing liability exposure. Builders face a challenging landscape where one misstep could impact the bottom line. But the good news? Smarter resources are emerging to help builders better manage these risks.

From protecting projects against construction losses to navigating the hardest insurance market in a generation, this year is all about proactive strategies that safeguard builder margins. In this second installment of our three-part series, we revisit Trends 4-6 from PWSC’s Top Residential Construction Trends 2025 report—focusing on risk, resilience, and the practical partnerships helping builders weather uncertainty.

Catch up on Part I for Trends 1-3 focusing on construction innovation. And, check out Part III for Trends 7-10 on housing affordability, technology, and why old warranties no longer work.

Trend #4: Builder’s Risk Sees Rising Costs and Challenges

As predicted, builder’s risk insurance has been hard to navigate this year. A perfect storm of inflation, labor shortages, supply chain delays, tariffs, and natural disasters have rates and premiums rising, coverage tightening, and underwriting scrutiny intensifying.

A new National Association of Home Builders (NAHB) and Home Builders Institute report estimates the skilled labor shortage cost the industry over $10.8 billion in 2024. Nearly 19,000 homes weren’t built due to labor-related delays—an issue expected to worsen in 2025 as immigration policies tighten.

Then add to that material cost unpredictability, amplified by tariff threats. The NAHB reports that material costs jumped by nearly 20% since the tariff announcements earlier this year with the average material cost to build a home now $11,000 higher—a price tag likely to climb if trade tensions continue.

No wonder insurers are scrutinizing project valuations and timelines under a magnifying glass.

Faced with significant losses over the last decade, insurers also are rationing capacity and “quota sharing.” Instead of one insurer taking the full risk, most projects now involve multiple carriers, creating complex and time consuming negotiations and the potential for coverage gaps.

Expect more upfront planning and tougher conversations around cost escalation with insurers for the rest of 2025. Builder’s risk isn’t just about coverage anymore. It’s about staying ahead of financial uncertainty in a sector where delays, rising costs, and disaster risks are now constant.

Trend #5: Insurance Draws a Hard Line—Again

The current hard insurance market isn’t getting any easier. General Liability premiums continue to rise—especially for multi-family projects—with Gallagher reporting rate hikes of 10-20%. Most single-family residential projects are seeing between 5% and 9% increases.

But cost isn’t the only concern. Insurers are demanding more from builders during underwriting. A good loss history is no longer enough to obtain affordable coverage. Carriers want to see progress: updated warranty and safety programs, better subcontractor oversight, financial stability, and documented steps to reduce defects and third-party claims. Data showing claim reductions over time is quickly becoming necessary to even sit at the negotiating table.

To navigate rising costs, more builders are exploring captive insurance options. Captives are gaining popularity for their flexibility and ability to cover difficult risks like design-build liability and subcontractor default. They offer builders more control and can help offset premium volatility.

In today’s cautious market, engagement matters. Builders who show how they’ve evolved their risk strategy are more likely to earn favorable terms.

Trend #6: Quality Control vs. Completed Operations

Quality assurance and control (QA/QC) practices remain critical to the construction process but only go so far in protecting against risk. While QA/QC reduces the likelihood of defects, it doesn’t eliminate them—especially with builders on the hook for latent defect issues up to 10 years post-sale.

With inflation, labor costs, and home values rising, the price of repairs is climbing too. Warranty Week reports that 27 U.S. builders, including some of the largest, paid more than $1 billion in warranty claims in 2024 alone, holding over $2.2 billion in reserves—double the amount from a decade ago.

To ease the litigation burden, more than 30 states have enacted Right to Repair laws. These give builders a chance to inspect and address alleged defects before a homeowner files suit. But in high-density projects, builders are often flooded with hundreds of claims at once. Miss a deadline—or have a repair offer rejected—and the case likely heads to court anyway.

Claim activity is especially high in multi-unit developments where class actions are easier to file. Juries tend to favor homeowners in defect cases and are awarding increasingly larger settlements. Often, QA/QC documentation is no match for these cases.

One of the best defenses is a written warranty. At PWSC, a team of construction experts evaluate each claim, apply state-specific construction standards, and recommend appropriate repairs. Mediation and arbitration provisions offer additional layers of protection, especially when illegitimate claims arise, to keep disputes out of court.

QA/QC helps builders deliver a better product, but it’s not a substitute for a long-term risk strategy. In 2025, builders need to think beyond the jobsite and protect themselves for many years to come. That’s where a professionally administered warranty can make all the difference.

Protect What You Build with PWSC

Risk in residential construction is nothing new, but in 2025, it’s harder to navigate than ever. From skyrocketing premiums to greater liability exposure, builders need strong partners to stay protected.

PWSC delivers end-to-end support—from builder’s risk coverage that meets lender requirements to best-in-class warranties that reduce legal exposure and improve the homeowner experience. We help builders protect their builds, their brands, and their bottom lines.

Coming soon: See how evolving customer expectations, AI adoption, and modern warranty practices are shaping builder success in the final installment of our 2025 homebuilder trend check-in series.