If you’re like most insurance agents, your existing book of business includes homeowners, whether they’re primarily your personal or commercial lines clients. These clients can be key to growing your book of business through your existing database.
A March 2016 Bankrate Money Pulse survey showed that 28 percent of owners had plans to remodel their existing homes within 12 months. For millennial homeowners (aged 18 - 29), the number was even higher, at 37 percent.
If your clients are planning to work with contractors for home remodeling projects this year, take a second look at how, or if, the structure undergoing construction will be properly protected under their existing permanent property insurance. Most homeowners don't know how to get home remodeling insurance or aren’t familiar with the benefits remodeling insurance for course of construction offers, so agents must shoulder the responsibility of explaining its value. While policies will differ from carrier to carrier, and vary depending on coverage endorsements and policy exclusions, standard homeowners and builders risk insurance are each designed for different exposures.
There are several actions agents with clients planning renovation projects should take to ensure their interests are protected, including:
- Compare their current coverage to their project needs. Many clients assume their homeowners policies adequately insure their risk. In reality, most homeowners insurance limits coverage for remodeling, and generally does not offer the robust coverage available through a standard builders risk policy, including for theft of materials or equipment, arson and vandalism. If clients aren’t aware of those limitations, they can be in for an unpleasant surprise when a loss isn’t covered.
- Evaluate their environmental risk. Don’t rely solely on geography to determine clients’ risk, either. According to the National Flood Insurance Program(NFIP), people outside of mapped high-risk flood areas file over 20 percent of all NFIP flood insurance claims and receive one-third of Federal Disaster Assistance for flooding. The Builders Risk Plan insured by Zurich offers clients the opportunity to add increased protection through optional coverage endorsements. By tailoring policies to meet your clients’ project needs, you can help them protect against loss from flood waters and earthquakes, as well as damage caused by wind and other unexpected exposures.
- Advise them to prepare for unforeseen delays. When a covered loss occurs on a project, which then causes other unexpected expenses to crop up, clients without adequate coverage can be left to pay for it out of pocket. Builders risk policies can provide protection for exposures like soft costs (out-of-pocket expenses like additional tax or insurance payments, interest on construction loans, and more) and business income/extra expense that may arise because of a covered loss.
- Discuss the possibility of changes during construction. A popular endorsement for home renovations is coverage for change orders that increase the value of the project but are not reported in a timely manner. Homeowners often change their minds about the materials to be used in their renovated home, so builders risk insurance can be structured so that the project is covered in the event of a loss, even if the homeowner decided to upgrade materials after construction had already begun.
When selecting a builders risk policy, a homeowner can find peace of mind knowing claims against the homeowners policy will be minimized should a loss occur during remodeling. A residential remodeling builders risk policy can also provide term extensions and renewals, the ability to include or exclude the existing structure during remodeling, and the option to expand coverage limits should change orders cause the project value to increase during the course of construction.
Simply by asking your existing clients whether they’re planning any renovations, you can uncover insurable needs and new revenue opportunities. When you explain the benefits that home remodeling insurance provides, you’ll have the chance to grow your book of business and help your clients secure valuable coverage in the process.
To learn more about the differences between homeowners insurance and builders risk, as well as how the gaps between those types of coverage can impact your client, download our free resource Is Homeowners Enough? A Builders Risk Coverage Comparison.
This is intended as a general description of certain types of insurance and services available to qualified customers. Your policy is the contract that specifically and fully describes your coverage. The description of the policy provisions gives a broad overview of coverages and does not revise or amend the policy.