Builders Risk for Homeowners: When is it needed?
Ever heard this question from a personal lines client?
“If I have a homeowners policy, why would I need builders risk insurance?”
Well, the short answer is: coverage gaps.
The missing coverages during new construction or remodeling might not be obvious until a loss occurs. At that point, your clients may encounter some unpleasant surprises when they learn that they weren’t protected as much as they thought.
Consider these four advantages for homeowners when they choose a builders risk policy.
1. Broad Coverage Scope
Builders risk is the best coverage option for projects under construction because that’s just what it’s intended to cover. Rather than tacking on coverages to a homeowners policy, you get comprehensive coverage for the course of construction … right out of the box.
Under a basic policy, covered property and losses can include the theft of building materials, fire, vandalism, property in transit, property in storage, and even property owned by subcontractors and suppliers. Builders risk can also cover damage to newly paved surfaces and installed trees, lawn, shrubs and plants. Insureds could even be covered for the expense of removing debris, which is really valuable after a covered loss.
With coverage endorsements, your client could have added protection risks including floods, earthquakes, wind storms, sewer or drain backups, and more.
And let’s say your personal lines client decides to upgrade the building materials mid-construction. Zurich builders risk insurance provides a change order endorsement for situations like this.
2. Higher Coverage Limits
Through the Builders Risk Plan insured by Zurich, you can easily secure a robust policy for projects valued up to 75 million dollars. Many coverages are automatically included in our basic policy with the option to increase sub-limits to meet your clients’ specific project needs.
For example, let’s say your client need to have debris removed after a loss. With the Zurich Builders Risk Plan, they’re covered for $50,000 for projects up to $5M or $100,000 for project values over 5 million dollars. With a typical homeowners policy, that amount is usually limited to the cost of 5% of dwelling, with a separate limit for tree removal, $500 and $1,000.
And let’s say due to a covered cause of loss, some of the construction scaffolding was damaged and needs to be replaced. With Zurich Builders Risk, your client could be protected up to $50,000 depending on their project value. With typical homeowners insurance, this coverage isn’t even available.
3. Favorable Policy Terms
For remodeling projects, the policy term could be six, nine or 12 months, and coverage can be extended pending underwriting review and approval. On top of that, homeowners can secure coverage for the renovation only or for the renovation and the existing structure.
The standard policy term for new construction is 12 months. This single structure or “one shot” policy can also be renewed with underwriting approval.
4. Minimizing Homeowners Insurance Claims
No one is ever excited about filing an insurance claim with their homeowners carrier.
So, what does this have to do with builders risk insurance?
Think about it: if your personal lines client has a builders risk policy in place during the course of construction, it’s less likely they’ll be required to report a claim on their permanent property policy if a loss occurs. In the end, the builders risk policy could help clients mitigate future rate increases or non-renewal.
If your client has plans to build or remodel, they need your guidance. Discuss how builders risk insurance can help them protect their investment and avoid potentially costly losses not covered under their homeowners policies.
To learn how the Zurich Builders Risk Plan stacks up to a typical homeowners insurance policy, download our Homeowners Coverage Comparison. In it, you’ll learn about the coverage gaps that could await your personal lines clients who rely on homeowners insurance during construction.
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.
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