Imagine this: your builders risk client experiences a loss to their construction project. They file a claim and eagerly await payment, only to find out their loss won’t be covered as they expected.
Then you discover they’re not getting paid because of an error you made during policy issuance. Yikes!
Before a nightmare like this becomes your reality, take these six steps into consideration to avoid the most common pitfalls that occur due to policy issuance errors.
Step 1: Know the product you're selling.
It seems obvious, but the details are often overlooked. Educate yourself first on all the basics of the Builders Risk Plan insured by Zurich, such as appetite and eligibility. From there, dig into details like when coverage begins and ends, how to calculate percentage complete, the difference between actual cash valuation and replacement cost, coverage endorsements, and exclusions and restrictions.
Right now, you’re probably thinking that this is a lot to learn. But having this information in mind means you can feel more confident presenting clients with the right options to protect their interests.
Our resource library is a great place to brush up your builders risk knowledge. We have dozens of guides, tip sheets, webinar recordings, videos and more on all of these topics.
Step 2: Educate your client.
So, now you’ve educated yourself. The next step is to introduce your client to the ins and outs of their builders risk policy. It’s an opportunity to demonstrate the value you offer and help ensure they understand the scope of coverage.
The more information you can cover upfront, the fewer surprises there will be along the way. Don’t forget to discuss coinsurance, coverage exclusions, and the occupancy clause. Many claims issues result from misunderstanding these specific topics.
Step 3: Confirm the requested policy limits align with the itemized construction budget.
This might be a topic you don’t hear enough about, but it can spare your clients time and headaches if a claim occurs. When a claims adjustor reviews the policy after a loss, they will send documents for the insured to complete and request a copy of the construction budget. The contractor for the project should develop the itemized budget, which should inform the requested coverage limits on the builders risk application. By walking through this itemized budget and confirming all the details match in advance, it saves you and your clients from misunderstanding about the extent of their coverage. It will also help them avoid more frustration as this can reduce the likelihood of claim issues or payment delays.
Step 4: Choose the right policy.
This is another one that might seem obvious. Considering all the project details that impact your client’s builders risk policy, choosing the right coverage option is a vital step.
Is it a new construction? Is it remodeling? How does the carrier define the difference?
For example, let’s say Builder A started a project as ground-up new construction, then abandons it. Builder B takes the project over. In this example, a new construction policy is required not remodeling insurance. Renovation policies are for projects that have been previously completed and are now being remodeled. Because the project in our example initially began as ground-up construction, it would continue to require new construction coverage.
How about the decision between a one-shot, reporting form or deposit premium policy? If it’s reporting form, do you select monthly or annual reporting? Depending on how long your clients need coverage, you may discover that choosing annual reporting could save them money.
This is another factor to discuss with your clients so they know what coverage they’re getting and why.
Step 5: Always get the application signed.
Document, document, document. It’s a mantra we want you to adopt because it could safeguard you if a loss occurs. Once you and your client have agreed on the policy type, coverages and limits, make sure they review then sign the application before you issue the policy.
For policies secured online, this is especially important as we don’t receive nearly as much documentation as we do if it’s a deposit premium or large commercial policy.
Keep a copy of the signed application in your records. Zurich will request a copy of it from you in the event of a claim.
When securing a policy online, a PDF of your application is presented along with the quote on the Issue Summary Screen. If you worked directly with an underwriter, just keep a copy of the application submitted to the underwriter with your client’s signature.
Step 6: Check in with your client during the policy term.
While it’s always a good idea to confirm your client’s coverage needs haven’t changed, it’s especially important in today’s economy. With the rapidly changing cost of building materials, project values increase just as quickly. Make sure you’re reaching out to your personal and commercial lines clients on a quarterly or semi-annual basis to inquire about their projects and update policies to reflect the coverage changes.
If their policy is coming up for renewal, check in with them to see if they need more time.
So, there you have it. These six steps will help you avoid policy issuance pitfalls and some tough conversations with your client!
Ready to issue your next Zurich builders risk application? Check out our Builders Risk Application Tip Sheet for underwriting guidance during the policy issuance process.
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.
