How to Choose the Right Builders Risk Policy for Your Contractor

Construction | May 18, 2018

When contractor clients are looking for a course of construction insurance policy, that means, as their agent, you must be ready to navigate numerous builders risk options to issue the right coverage. The question is: how can you quickly select the right policy for each contractor’s project?

The basic policy choices available through the Builders Risk Plan insured by Zurich are single project policy (also known as a one-shot policy), reporting form policy, deposit premium policy and blanket installation. Whether your clients are general contractors, subcontractors, tradesmen or service providers, their need for comprehensive coverage on construction projects remains the same. To determine which policy type would be best, consider the following questions:

1. What kind of structure is it?

Is the project residential or commercial? While insurance providers may define this differently, the Builders Risk Plan recognizes residential structures as those with one to four family units, while it considers those with five or more family units (or a business entity / commercial operation) a commercial structure.

2. What type of construction is needed?

Is this project new construction, or will it remodel a structure already in place? Remodeling runs the gamut from basic changes like replacing cabinets and flooring, to minor structural remodeling like doors and windows, and even major structural like replacing / removing load-bearing walls.

Whether coverage is needed to protect the existing structure is important to determine the right policy type. If clients wish to insure the existing structure, they should be prepared to invest 20+ percent of the existing structure’s value.

Installation is a simpler, but crucial coverage designed to cover one aspect or service to a structure like installing fencing or paving a driveway.

If Bill Builder is planning ground-up new construction, his choice would either be a residential or commercial single project policy. Connie Contractor, however, is planning to remodel an office building. Her choices might either be a commercial remodeling or commercial installation single project policy, depending on the extent of the remodel and what she wants to insure. 

3. How many projects need coverage?

In some instances, clients may need more than one project covered. For instance, let’s say Bill Builder is planning to build 20 single-family homes in 12 months. While he could still obtain 20 separate residential single project policies, Bill’s agent might instead decide he’s a reliable candidate for a reporting form policy, which enables Bill to manage coverage in a more convenient way. If Bill had 50 or more starts in a given 12-month period, he might also be eligible for the deposit premium policy.

The nuances that separate projects can take time to master. Consider these project examples.

Connie Contractor is planning:

  • Minor remodeling
  • Valued at $800K
  • Three office buildings in a 12-month period

In this instance, her agent might secure a reporting form policy or three separate single project policies. However, her options change with the projects. Let’s say Connie Contractor is planning:

  • Major structural remodeling
  • Valued at $5M
  • Three office buildings in a 12-month period

In this instance, she would need three separate single project policies. Lastly, let’s say Connie Contractor is planning:

  • Installation (new tile floors)
  • 3 office buildings in a 12-month period

In this instance, she might then be eligible either for three separate single project installation policies or 1 blanket installation policy.

4. What is the project value?
Ultimately, the answer to this question has more of an impact on how agents can quote and issue the policy than the policy type itself.

Consider the following:

  • Single commercial or residential project
  • New construction, remodeling or installation
  • Valued up to $10M (or multiple residential projects valued up to $3M per structure)
  • 12-month period

If it fits this criteria, you can secure that coverage online through US Assure’s automated online issuance system. However, consider the differences below.

If clients need coverage for:

  • Single commercial project valued up to $75M, multiple commercial starts within a year, 25+ residential or commercial projects (valued up to $3M per structure, or $1.5M if coastal), or multiple installation projects
  • New construction, remodeling or installation

If it fits this criteria, the application would need to be completed manually and reviewed by an underwriter to ensure all applicable coverage is secured.

When it comes to securing coverage for contractors, time is of the essence. Armed with answers to these questions, you can more quickly quote and issue the right builders risk insurance policy, every time.

For more insight about builders risk policy options, download Navigating Builders Risk: Agent Guide to Finding the Right Policy.

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.

Which builders risk policy is right for your client?

With US Assure’s easy-to-use resource, learn to navigate builders risk policy options to more quickly and confidently issue the right coverage--every time!

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