Do you know what to look for in a builders risk client? Test your knowledge with the following question: Bill Owner is remodeling his house, and he hires Charlie Contractor to do the work. Who should be policyholder for the builders risk policy?
A. Bill Owner
B. Charlie Contractor
C. Either one of them
If you answered C, great job! If you answered A or B, don’t worry: we find this is often a source of confusion for insurance agents. While the underwriting for a builders risk policy must consider the experience of Charlie Contractor, the policy could be purchased in the name either Bill Owner or Charlie Contractor. In either case, the contractor must meet the insurer’s requirements for project-related experience in order to be eligible for coverage.
In fact, your client’s residential builders risk policy is not limited to the owner or contractor. Development companies, investment companies or property/house-flipping companies can all be residential builders risk clients, as long as the contractor’s experience satisfies the insurer.
Ready for your next question? This scenario involves a commercial construction project.
Ollie’s Office Supplies, Inc. is building a new retail store. The space will be leased and is owned by Larry Landlord. Charlie Contractor is managing the construction project. Who should be the builders risk policyholder in this scenario?
A. Ollie’s Office Supplies, Inc.
B. Larry Landlord
C. Charlie Contractor
D. Any of the above
If you answered D, you’re correct.
Just like residential construction, the builders risk client for commercial construction can be the property owner or the contractor, but others can be the policyholder, too. Real estate development companies, investment companies, retail companies and even school districts can all be builders risk clients, as long as the organization has an insurable interest in the property. As with residential construction, underwriting will consider the experience of the contractor, so the chosen contractor must meet minimum requirements as set by the insurance carrier.
To learn more about how to get started with builders risk insurance, tips on how to design policies and underwriting insights, watch our free Builders Risk Basics webinar today. 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.