12 Builders Risk Insurance Endorsements Explained

Course of construction disasters are devastating, but the implications are even worse when the right builders risk coverage wasn’t secured.

The most effective way to manage the risk of unanticipated costs and delays during the course of construction is to secure a builders risk policy catered to your client’s specific project needs.

With comprehensive insurance coverage and flexible policy options, a Zurich builders risk policy is designed to protect almost any construction project valued up to $75 million. Following are just some of the optional and additional coverage endorsements that can enhance your client’s scope of coverage with the Builders Risk Plan insured by Zurich.

For Residential and Commercial Construction Projects 

Better Green

The better green endorsement is available for purchase for residential and commercial projects and covers additional costs incurred from a direct physical loss caused by a covered peril and associated with construction of “green” building.

"Green building" is a building or structure which is registered with the USGBC as a "LEED®" building or structure and will incorporate or comply with the "green standards" and which upon completion will undergo the process of being certified by the USGBC or otherwise pursuant to such standards.

Contract Change Order

Contract change order endorsements typically account for upgrades to residential building plans during the course of construction to avoid a gap in the policy coverage limits and the structure’s estimated total completed value.

This endorsement is available for purchase in increments of 10, 20 or 30% of the total insured value at the time the policy is issued or endorsed later to cover increased construction cost, provided such increases are evidenced by signed change orders prior to loss.

Debris Removal  

Debris removal is automatically included in our residential and commercial builders risk policies, with the option to increase sub-limits beyond the standard amount provided. The coverage protects from debris removal expenses on the property caused by a covered cause of loss if it’s reported in writing within 180 days of the date of the direct physical loss or damage.

This additional coverage does not apply to costs incurred from extracting “pollutants” from land or water, or removing, restoring or replacing polluted land or water.

Development / Subdivision Fences, Walls, Signs 

Available only for reporting form and deposit premium policies, this endorsement is designed to insure damages caused by a covered loss to free standing fences, walls and signs erected at a development or subdivision during the course of construction.

Examples of property covered include entrance-way signs or walls, retention pond fences, and fences or walls that border the development or subdivision.

Expediting Expenses 

For the purposes of this additional coverage, expediting expense covers the cost incurred to rush permanent repair or replacement of lost or damaged covered property or to complete a covered project in the period stated by the construction contract.

This additional coverage is available for purchase and subject to the deductible applicable to the covered cause of Loss for the lost or damaged covered property.

Inflation Guard*

Inflation guard is an endorsement available for purchase for residential and commercial new construction and remodeling projects valued up to $10 million. Unlike our contract change order endorsement — where the cost of materials increases at the owner’s direction, inflation guard covers the unexpected cost increases of materials being installed throughout the course of construction, up to 5% and split over the entire policy term.

Inflation guard is automatically included for commercial projects valued more than $10M with different coverage terms.

*This endorsement is not yet available in CA and DC for projects valued up to $10M.

Interest of Subcontractors 

This additional coverage is automatically included on both coverage forms for projects valued up to $75M and protects the interest of subcontractors and suppliers in the covered property only while such property is situated at the project site of the insured.

Named Storm Deductible 

This endorsement is available for purchase and recognizes a named storm event where this deductible is applicable should a loss occur. If a non-named wind event occurred, the “all other peril” deductible will apply to the covered loss.

Testing 

Installed equipment must undergo testing to ensure it performs properly before it can be utilized. This endorsement, which is available for purchase for residential and commercial projects, applies exclusively to “cold testing.”

Cold testing provides coverage for testing of installed building systems and equipment that is intended to heat, cool or service the building, including but not limited to electrical, mechanical, hydrostatic and pneumatic.

Hot testing is not eligible, which may include the application of heat, fuel, feedstock, or connection of equipment to a grid or load circuit.

For Commercial Construction Projects Only 

Loss of Business Income or Rental Income*

The loss of business or rental income endorsement is available for purchase and designed to protect actual loss of business or rental income incurred due to a covered cause of loss, including:

• Loss of business income: When a building cannot open for business on time, the owner has an insurable interest in the loss of business income due to a delay in start-up operations.
• Loss of rents: If delays in construction prevent the owner of a commercial building from leasing space to tenants, loss of rents would cover the loss of rental income due to tenants not being able to move into the space as originally planned.

*This is not available for installation projects. Only the commercial building owner who has an insurable interest arising from loss of income or rents can obtain proceeds from this endorsement, and only if that building owner was a named insured.

Permission to Occupy*

If all other conditions are met, the permission to occupy endorsement provides restricted coverage for risk of loss or damage from the time legally responsible for the property on or after the effective date of the policy. Coverage typically ends after the occupancy conditions have been achieved, but it can be sooner if another policy condition ends coverage first.

*This is not available for installation projects.

Soft Costs 

Soft costs are expenses incurred during construction that are not associated with labor or building materials but can be directly attributed to a covered loss, such as interest on construction loans, insurance premiums or licensing fees.

While soft costs exist in both residential and commercial construction projects, this endorsement is available only for commercial projects, and covers specific soft costs that would not have been otherwise incurred without a delay in the anticipated completion date of the project.

Following are a few examples of soft costs; however, these will vary among providers:

• Advertising and promotional expenses
• Interest on construction loans
• Architects, engineers and consultants fees
• Real estate and property tax assessments
• Commissions or fees for lease renegotiation
• Insurance premiums
• Legal and accounting fees
• License and permit fees

There you have it! Whether you’re new to builders risk insurance or a seasoned professional, a better understanding of these coverages helps you offer a personalized policy that can protect your clients from unforeseen circumstances.

These coverages can be selected during the online application process when you log in to usassure.com. Should you have questions, talk to a member of our dedicated service team by calling (800) 800 – 3907.

Want to share this information with others in your office? Download 12 Builders Risk Coverage Endorsements Explained for an organized chart of several residential and commercial coverages you can reference at a moments notice.

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.

12 Builders Risk Insurance Endorsements Explained

Get descriptions of several residential and commercial coverage endorsements.

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