Naming Names: Choosing Named Insureds for Home Building and Remodeling
Imagine a client comes to you and needs a course of construction insurance policy to cover the building or remodeling of their home. You begin to gather the information required to select the right coverage and limits. But before you can do that, you have to determine who the named insured should be.
When it comes to completing an insurance application for builders risk insurance, a lot can depend on the named insured you choose. So, how do you pick? Should it be the property owner or the contractor?
We get this question all the time. Our simple answer is: do what’s best for your client. So, whether it is the owner or the contractor, put the policy in their name.
Of course, there are factors you’ll need to bear in mind. For instance, if a construction contract or construction agreement is in place, it may have stipulations regarding who holds the policy.
Here are some additional scenarios you may encounter.
What if your client is the homeowner, and they part ways with the contractor halfway through the construction project?
The policy follows the policyholder. So, if the homeowner and contractor have a dispute, the policy will follow the person under whose name the policy is written. If the named insured is the contractor, parting ways may leave a homeowner client in the challenging situation of having to find another policy that will accept a risk already in progress. And should the project incur a loss when the policy is still held by the contractor, the claim check would be made out to the contractor.
What if your client is the contractor, but the property owner insists their name be included as a named insured on a single-structure / one-shot policy?
In this instance, you could list both parties as the named insured. However, keep in mind that should your builder client and the property owner have a falling out, both parties will be listed on the check in the event of a claim. That can leave your client in a delicate spot, as they will need the other named insured (the property owner) to endorse the check before receiving payment.
What if your property owner client wants to have their own coverage, but the contractor already has a builders risk policy in place?
Because many carriers may consider this double coverage, your client likely would not be able to have a separate course of construction policy on a risk that is already insured. However, your client could potentially list their name as an additional named insured to the contractor’s existing single-structure policy. In the event your property owner client may need to file a claim, they may also want to ask the contractor to provide a certificate of insurance.
One way or another, our advice stands: have the conversation with your client and do what is in their best interest. If there is a construction agreement in place, that may put some limitations on your options. The choice of named insured can have a lasting impact, so clearing up client concerns with these scenarios may help ease their mind and protect your business.
Once you know who you’re covering, the next step is choosing a policy. Learn how to quickly compare various builders risk policies and choose the right option for your client when you download our free resource, 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.
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