New Home Construction Insurance

Agents and brokers can secure builders risk coverage for nearly any residential new construction project under a single structure policy (also known as a one shot) or a reporting form policy. Single structure builders risk policies are designed to cover one specific structure or project under construction. This policy is ideal for homeowners or contractors insuring one project within a given time. These policies typically have a 12-month policy term, with the option to renew. A residential reporting form is designed to help contractors and their insurance agents manage coverage for multiple new construction projects under the same policy. This policy must be issued under the contractor’s name and requires periodic reporting of new project starts or inventory depending on the annual or monthly rate selected by the contractor. If your client is comfortable managing the ongoing reporting requirements and associated premium payments, this might be a convenient policy to insure your contractor client.

One of the biggest considerations when comparing policies for residential new construction is cost. It is typically more cost-effective to choose a builders risk policy than a homeowners insurance policy for residential new construction, because the policyholder is not paying to cover contents — just the structure to be built. Builders risk policies also include coverages that are not typically available in homeowners insurance policies, including debris removal, pollution clean-up, property in transit and even property stored offsite in a temporary location.

One great feature of builders risk insurance is that a policy can be written in the name of either the contractor or the homeowner. Policy features, benefits and terms remain the same, no matter who is identified as the insured. Remember that the named insured has some contractual rights and benefits under the insurance contract. Your client will retain those rights as the policyholder, regardless of whether your client is the contractor, homeowner or other entity.

Homeowners often change their minds about building materials after the start of construction, and change orders are routine in residential construction. If policy limits are not properly adjusted to reflect the change in increased value, a loss could leave your client underinsured and with possible penalties. The Builders Risk Plan insured by Zurich offers additional protection to cover such change orders, helping homeowners to avoid possible coinsurance penalties if a claim should occur before the increase in completed value is properly reported to the provider. The added protection is done as a change order endorsement for additional coverage of up to 10, 20 or 30% increments should the total value increase during the policy term. The endorsement provides the insured with peace of mind knowing that coverage is in place if it is needed to protect them from additional loss.