Policy Exclusions in Construction: What’s Not Covered and Why It Matters

When you hire a contractor or buy insurance for a construction project, policy exclusions, specific conditions or damages that an insurance or service agreement does not cover. Also known as coverage gaps, these are the hidden rules that can leave you paying for repairs you thought were protected. Most people assume their insurance or contract covers everything—until something breaks, and they’re told, "That’s not included." In construction, where projects can cost tens or even hundreds of thousands, missing one exclusion can cost you more than the entire job.

These exclusions show up everywhere. For example, if you’re fixing a cracked foundation, your homeowner’s policy might exclude damage caused by gradual settling—something foundation settlement, the natural sinking or shifting of a building’s base over time—unless it’s sudden and caused by a covered event like a flood. Same goes for mixed-use buildings: if you’ve got steel below and wood above, your builder’s policy might exclude liability if fire separations don’t meet code. And if you’re doing a bathroom remodel, some warranties won’t cover water damage from DIY tiling mistakes. These aren’t loopholes—they’re legal boundaries. The companies behind these policies aren’t trying to trick you. They’re protecting themselves from risks they can’t predict or control.

What makes this even trickier is that exclusions often depend on the type of work. commercial construction, projects designed for business use, like offices or retail spaces has stricter rules than residential work. A roof repair on your house might be covered under a standard policy, but if you’re installing a new roof on a warehouse, the exclusions could include wind damage if the materials weren’t rated for commercial loads. Even something as simple as drilling into a new build wall has exclusions—many builders won’t cover damage to hidden wiring or pipes if you didn’t use a stud finder. And if you’re trying to fix your own foundation? Most policies explicitly exclude DIY repairs unless done by a licensed pro.

You won’t find these exclusions in bold on your contract. They’re buried in fine print, often listed under "limitations," "conditions," or "not covered." But here’s the thing: knowing them isn’t just smart—it’s necessary. If you’re planning a renovation, hiring a contractor, or even just buying a new home, you need to ask: "What’s not covered?" Because the answer could mean the difference between a smooth repair and a financial disaster. Below, you’ll find real examples from actual construction projects where policy exclusions turned small problems into big losses—and how others avoided the same fate.