Table of Contents
A guide to understanding agreements, insurance, and key protections that keep your project on track
Introduction
Once you’ve chosen your contractor and are preparing to move forward, you’ll be asked to sign a construction agreement and possibly coordinate insurance, deposits, and other approvals. This is where contracts and risk management come into play.
This section of the guide will walk you through the basics of how construction risk is managed. Whether it’s through clear language in a contract, insurance coverage, lien waivers, or handling change orders, each piece plays a role in setting expectations and protecting your investment.
You don’t need to be a legal expert, but by the end of this section, you’ll know what to look for, what questions to ask, and how to avoid surprises.
What You’ll Learn in This Section
This part of the guide is designed to help you:
- Understand the main types of construction contracts, how they’re structured, and what risk they shift to you or the contractor
- Know what to look for in a contractor’s agreement before you sign
- Learn about construction insurance, including what coverage is standard and what’s worth double-checking
- Understand the difference between Builder’s Risk Insurance and Homeowner’s Insurance, and when each applies
- Know what lien waivers are and how they protect you from future claims
- Learn how to handle change orders during construction without confusion or frustration
Each topic is broken into a dedicated page so you can review them at your own pace.
Why Contracts and Insurance Matter
Even well-run construction projects come with unexpected changes. A clear contract, adequate insurance, and proper documentation won’t prevent every issue, but they give you a framework to handle problems professionally and fairly.
This section will give you clarity on:
- What’s typically included in construction agreements
- What’s negotiable or worth asking about
- How to confirm that your contractor is insured and licensed
- How to track payments and approvals during construction
- What to do if changes arise after work begins
You’ll come away with a better understanding of how to reduce risk, avoid miscommunication, and protect yourself legally and financially.
Terms You’ll See in This Section
We’ll break down a few of the most common terms and concepts, including:
- Fixed Price, Cost-Plus, and Time-and-Materials Contracts
- General Liability vs. Builder’s Risk Insurance
- Indemnification
- Change Orders
- Lien Waivers / Releases
- Allowances and Exclusions
Each will be explained in plain language with examples, so you know how they apply to your specific project.
When This Section Applies
You’ll want to review this information when you’re:
- Reviewing or negotiating a contractor’s proposal
- Preparing to sign an agreement
- Verifying your own insurance coverage
- Coordinating with a lender
- Beginning pre-construction or mobilization
- Managing mid-project changes
Even if you’re not quite at that stage yet, reviewing this content in advance will help you spot potential issues early and ask better questions when the time comes.
What’s Next: Types of Construction Contracts
The first part of risk management starts with how your contract is structured. Different agreements come with different pricing models, risk profiles, and flexibility. The next page explains the pros and cons of each so you can make a confident, informed choice.
Continue to Types of Construction Contracts to compare pricing structures and see what’s most common and most useful for residential and light commercial construction.