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While insurance is a vital tool for transferring risks associated with construction projects; previous research works conducted on the area of insurance and risk management of projects in the Ethiopian construction sector indicated that there is a substantial gap in relation to appropriate practice of risk management and the use of insurance in the sector. This research is therefore based on the belief that current problems in the insurance practice of Ethiopian construction industry needs to be identified through a detailed study in order to provide possible recommendations for improvement. The research findings indicated that parties need to have a concrete knowledge about risk and insurance as a risk transfer mechanism to make it a practical part of their construction activities. In a nutshell the findings indicated a number of gaps in the insurance practice of Ethiopian construction sector that needs improvement and accordingly recommendations are provided. This work should be a reference to professionals in construction engineering and management; professionals working in construction and insurance interface and anyone else who needs to further study in the area.