Is this your first project that requires builders risk coverage (or risk for builders) and are you feeling overwhelmed by the volume of coverage that needs to be considered? We understand. Coverage forms still confuse us from time to time.
Or maybe you are an experienced builder who has fallen into the rut of hiring risk builders, with the same options for all your projects?
Either way, it’s worth stopping to consider the impact on your bottom line and the risk you take on each project.
Our expert partner in the field, Rodolpho Sanz, was asked to come up with six easily overlooked covers and why you should give them (and yourself) a chance to shine if disaster strikes. Read below.
1. House not sold
What do you do when the two years of Builders Risk Plan coverage is over, but you still need coverage? Also known as a third year Builders Risk policy , our unsold home coverage protects the construction of a new home that is nearing completion or completed and awaiting sale. This Zurich policy is also available for the second year. Keep in mind that the form of coverage for the unsold housing policy differs from our standard risk policy for builders. Compare them with your policyholder so you both know what to expect when it comes time to transition your policy.
2. Law Code (Building Code)
This required coverage is automatically included for eligible residential and commercial construction and renovation projects when the existing structure is excluded.
Let’s say you have a homeowner client who needs a Builders risk coverage for the construction of their new home. When the project is nearly complete, a storm blows a tree through the structure. When construction restarts, building codes change the guidelines for the roofing system. With Ordinance or Law coverage, your client could be covered by the materials to bring the roof to the new code. Without it, the customer would be paying out of pocket for the added materials, and those costs really do make a difference.
3. Change the order
When the value of the project is established and a builders risk policy is guaranteed, the client’s spontaneous change of mind to the construction plans or materials, can cause loss in the event of a claim. Modifications often increase the value of the project but are not reported to the insurer, resulting in under-insurance for the project. However, with a Change Order endorsement (change order), they may be covered to protect the project’s increased value. This coverage may be added as a safety net in increments of 10, 20 or 30 percent of the total insured amount at the time of issuance or moving at a later date. Ideally, you, the builder, would call his insurer to update your coverage limits with every design change. But if it doesn’t, this automatic change can protect them.
4. Testing building systems
This clause provides you, builder, residential and commercial with coverage for testing, start-up, commissioning, examination or testing of the covered property to prove its ability to work with high pressure vessels (also known as hot testing) currently excluded from the form of coverage. Imagine that, midway through construction, your contractor’s HVAC ( heating, ventilation, and air conditioning) unit is installed incorrectly. During a thunderstorm, a power surge damages the unit. With Building Systems Test coverage, the contractor will have the money needed to install the new equipment and carry out the necessary tests.
5. Shipping Expense
You’ve heard the expression “time is money”. It doesn’t get more literal than this coverage. When residential or commercial customers suffer a loss due to a covered cause, expediting expense coverage helps them get the project back to its pre-loss state…faster! With this clause selected in the coverage, your residential and commercial customers would receive the financing to expedite the permanent repair or replacement of lost or damaged covered property.
6. Rain, snow, ice or hail
Also known as a water intrusion, this coverage extension is available for commercial new construction projects valued at up to $75 million. If a structure is not fully enclosed, this selected clause in coverage for rain, snow, ice or hail ensures that you, the builder and investor are covered should your structure suffer damage from water intrusion.