“It’s the little things that count.”
You’ve heard this expression before. It might make you think of taking the afternoon off, opening doors for strangers, and smelling the roses.
But when it comes to builders risk insurance and a construction disaster, whether or not you pay attention to the “little things” can make the difference between saving the day or burdening your client with more stress because their project was underinsured.
Rather than “wax on, wax off,” let’s explore which three builders risk policy details you need to conquer in order to give your commercial and personal lines clients the best insurance experience throughout the course of their construction.
- Anticipated Completion Date
When you’re submitting a builders risk application, it’s a common mistake to use the policy expiration in place of the anticipated completion date. After all, it’s the last day clients will need coverage. Right? Well, not quite.
In the event that your client’s residential or commercial construction project incurs a loss, Zurich’s claims adjustor will rely on the information you entered on the application. If the anticipated completion date is incorrect on the application, it can create trickled issues in triggering coverage for a delay in the project.
And, if the course of construction policy included “time-element” coverages like soft costs or business income, an incorrect completion date can mean that coverage could be less or never trigger for the loss. Meaning, they won’t get the full benefit of coverage for which they paid.
When you’re completing a builders risk application, confirm that you’ve entered the “Anticipated Completion Date” as it’s listed in the construction agreement, rather than the policy expiration date. If you can’t find it in the agreement, just ask your client.
Double-checking this detail before you submit the application can ensure clients get the coverage they’re expecting, and allow you to deliver value as the trusted insurance agent who’s always on the ball.
- Allotment of Soft Costs and Hard Costs
When you’re determining how much coverage your construction client will need for their project, it can be easy to overlook or miscalculate the allotment of hard costs and soft costs. And if those numbers are not correctly calculated and entered on the application, it can mean clients are not properly reimbursed for their losses in the event of a claim.
For example, let’s say you list the soft costs value under hard costs in the application. Then, clients incur a loss that requires soft costs to be paid. When they file that claim, their coverage might not trigger and they might be unpaid or underpaid for the loss.
Typically, a construction agreement or cost breakdown will dictate the builders risk coverage limits for hard costs and soft costs. The hard cost sum is based on the total completed value of the project and includes all costs associated with the design and building of the covered property (including, but not limited to: site work, labor, building materials, developer fees, impact fees, contingency, profit, etc.) less the soft cost value.
Soft costs are less tangible items that were likely paid prior to construction, such as advertising and promotional expenses; construction loan interest; architect, engineer and consultant fees; real estate and property tax assessments; commissions or fees for lease renegotiation; insurance premiums; legal and accounting fees; license and permit fees; etc.
- When Builders Risk Coverage Ends
Do you know when your client’s builders risk coverage will stop? You might think, “Sure! When the project is complete. Or, when the policy expires.”
Well, yes and no. This gray area can spell trouble for your clients if they’re expecting coverage to be in place and it already ceased. So, what causes builders risk coverage to end?
Any of the below could trigger coverage to stop, whichever occurs first:
- The policy expires or is canceled.
- The client’s interest ceases because:
- The policy expired or was canceled.
- The property was accepted by an owner or buyer.
- The property was leased or rented.
- The property was abandoned without intention to complete.
- When permanent property insurance becomes applicable.
- 60 to 90 days after occupancy, depending on the coverage form selected at issuance.
It’s important to note that this is not an exhaustive list, and coverage terms will vary by the form selected at issuance. Walk your clients through their builders risk coverage terms to ensure they know the significance of these coverage-ending events. You could also request their signature on a printed or digital copy as a protective measure for your business.
Mastering the finer points of the Builders Risk Plan insured by Zurich is a big part of delivering value for your personal and commercial lines construction clients. Keep these items in mind to ensure one little detail doesn’t make for disappointed clients.
Want to know how to avoid other common policy issuance mistakes? Download our guide, 7 Common Builders Risk Claim Mistakes (and How to Avoid Them).
This is intended as a general description of certain types of insurance and services available to qualified customers. Any description of policy provisions is meant to give a broad overview of coverages and does not revise or amend a policy. Refer to the policy coverage form for a complete representation of the scope of coverage, terms, conditions, exclusions and more. The policy is the contract that specifically and fully describes your coverage. Some products may not be available in all states and may only be offered on a non admitted basis. Product availability is subject to change.