If you’re a personal lines agent or new to the builders risk insurance marketplace, you might be wondering why clients should purchase any other policy beyond homeowner’s insurance when undergoing new construction or a remodeling project. The short answer in determining whether homeowners truly need builders risk insurance is that there are often gaps in coverage when relying on the homeowner’s policy that may not be apparent until a loss occurs. At that point, clients can be in for some unpleasant surprises when they learn that their losses are not covered to the extent they anticipated.
Here are five of the most popular advantages of using builders risk insurance in conjunction with an existing homeowner’s policy:
1. Broad property coverage
Builders risk policies offer coverage that extends far beyond what inclusions typical defined in homeowner’s policies.
In general terms, the definition of covered property and losses can include the theft of building materials, property in transit, property in storage, and even property owned by subcontractors and suppliers. Builders risk can also cover damage to new paved surfaces and installed trees, lawn, shrubs and plants, and the expense of removing debris after a covered loss.
Coverage is available for most types of structures, including custom homes, tract homes and modular construction.
2. Endorsements offer additional coverage options
Builders risk policies can also provide coverage for damage caused by floods, earthquakes, wind storms and sewer or drain backups. Coverages like flood and earthquake are not covered under a standard homeowners policy and would require the owner to purchase a separate policy. Builders risk insurance offers a number of other optional coverages, including automatic coverage for change orders if the homeowner decides to upgrade building materials mid-construction, water intrusion coverage, soft costs not typically covered under other policies, and even coverage for the added cost that may be involved when using “green,” or sustainable, building materials.
3. Flexible coverage limits
Through the US Assure Builders Risk Plan insured by Zurich, agents can easily secure a comprehensive policy for projects valued up to $50 million. Many coverages are automatically included in our basic policy with the option to increase sub-limits to meet the very specific needs of the project.
4. Attractive policy terms
For homeowners purchasing coverage, a standard builders risk insurance policy term is 12 months on new construction projects, and the single structure policy can be renewed with underwriting approval. For remodeling/renovation projects, the policy term is six, nine or 12 months, and those terms can also be renewed.
5. Minimize claims for homeowner. Even if a claim occurs, the homeowner with separate builders risk policy does not need to worry about the risk of impacting their premiums or future coverage for their homeowner’s policy because coverage was secured under a separate policy unrelated to that homeowner’s insurance.
If you have clients starting or considering new construction or remodeling projects, discuss how builders risk insurance can help them protect their investment and avoid potentially costly losses not covered under their homeowners’ policies.
To learn more about how builders risk insurance can benefit personal lines clients as well as the basics of builders risk, agents can view the Builders Risk 101 Guide. In the guide, you’ll learn all about policy types, additional coverages and more.
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.
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