Question 1

Do all contractors have to have Builders Risk Insurance?

Accepted Answer

In general, the law does not require you to have a Builders Risk Insurance policy. However, if you do not have this policy, most of your clients will refuse to work with you. Your clients highly value this insurance because it is a sign that you will take care of their property. During a construction project, many types of losses could occur, including financial loss. If you have this insurance policy, you will have some peace of mind. As a builder, buying insurance is one of the best things you can do for your business.

Question 2

What is co-insurance?

Accepted Answer

ou have to insure your project to 100% of replacement cost.  If you are insured below this, in the event of a claim you will receive a co-insurance penalty.  The amount of the penalty will be calculated from the following equation: Lets assume you are insured to $300,000 and your replacement cost is $400,000.  In the middle of your construction there is a claim for $100,000.  The amount you would be paid is $75,000 per the co-insurance penalty equation.  You would be $25,000 out of pocket.$300,000/$400,000 * $100,000 claim = $75,000

Question 3

Are soft costs included?

Accepted Answer

Costs for architects, lawyers, expediters etc. are not covered, but can be added by endorsement.  It is a very good idea to add these and it is not expensive.

Question 4

Who are funds paid to in the event of a loss?

Accepted Answer

The funds are paid to the lien holder/mortgage company.  From here the funds can be drawn as repairs are made or rebuilding restarts.

Question 5

If I have a larger project, is it possible to have a schedule where buildings are coming on and off as they start and finish?

Accepted Answer

Yes this is possible and it is called a “reporting form” policy.  Every month you send in your starts and finishes to the insurance company and the pro-rate your insurance policy.

Question 6

How long does it take to get a policy into force?

Accepted Answer

Literally hours.  Since there is no real underwriting in that nothing or very little it there, most of the major companies are “quote and issue” meaning the policy can be bound by the agent in minutes as long as they have a check or an approval from your mortgage broker that the policy will be paid out of closing.

Question 7

Does Builders Risk Insurance provide liability coverage?

Accepted Answer

Builders Risk Insurance only provides coverage for property damage. It does not provide coverage for liability. If, as a general contractor, you need coverage for liability, you can consider buying a general liability insurance policy too. The cost of this project is not very high. Every contractor needs different insurance coverage. You can find out more about contractors liability insurance here.

Question 8

Does Builders Risk Insurance provide coverage for theft?

Accepted Answer

Yes, there is coverage for theft, but the extent depends on your particular Builders Risk policy. In some policies, the Builders Risk coverage does not go beyond the amount of the policy. In other words, they provide limited coverage for theft. Some insurance policies don’t provide any cover for theft. At Builders Risk Insurance, we know that theft is a primary concern for contractors. This is why we make sure that your Builders Risk Insurance policy covers theft. Theft of materials is very common.

Question 9

Why purchase Builders Risk Insurance from BuildersRisk.net?

Accepted Answer

BuildersRisk.net focuses on only insuring builders risk and property coverage.  We have over 15 companies we  write through to get you the best value for your money. In contrast  in your local agent might have one or two.  In 99% of the cases we write, we can have a policy to you the same day.  Give us a chance to compete with your current agent and we are certain you will be satisfied with your pricing and coverage.

Question 10

How much do I insure the project to?

Accepted Answer

You are required to insure your project to 100% of the final value of rebuilding. Remember this is not the market value of the project, but the replacement cost in building. This value will not include the value of the land.  As you are doing the building or you have a contract with a builder,  who will be building the project this should be an easy number to come up with.  Remember the cost is not high for this product and you are best estimating the costs on the high side. This leaves you some room in your number if costs go up.

Question 11

How much does a ground-up construction policy cost?

Accepted Answer

Several factors determine the cost of a ground-up construction policy. The locations of the construction project and construction materials are two important factors. If the project is 50 miles away from the coast, the cost is $200-$500 per $10,000. If you want to save money, taking a higher deductible can be a good idea.

Question 12

If I cancel, do I get my money back?

Accepted Answer

Short answer is no.  Builders risk policies are known as “One Shot” policies and there is not return of premium when the builders risk policy is canceled

Question 13

Ïf the project becomes bigger or more costly, can I increase coverage?

Accepted Answer

es, absolutely.  You only will need to call your agent.

Question 14

Can I pay for the premium out of escrow at my mortgage company/bank?

Accepted Answer

Yes.  It is very easy to set up and we would only need the contact of your mortgage broker/banker to set up.  The check to the insurance company will be sent out of closing.

Question 15

What happens when the project is finished?

Accepted Answer

If the project is a home, you will need to buy a homeowners policy when the project is finished.  Usually you can only qualify homeowners insurance, if the home is occupied.  Once the home is occupied, it is very easy to call us for a homeowners quote and the price is inexpensive since the building is new.  It is very important to call and change this as soon as possible in that the homeowners policy offers much more coverage in terms of liability, loss of user, sewer back up, personal property, etc.

Question 16

How long does a Builders Risk Insurance policy last?

Accepted Answer

In general, the duration of the policy is 6 months to 1 year. However, if there is no claim during construction, you can renew the policy very easily. If the project goes longer than 2 years, it may be more difficult to renew. Is it time to renew your insurance?

Question 17

Is my project covered for wind/hail?

Accepted Answer

Many policies in coastal and tornado states do not cover for wind and hail or there is a special % deductible for any claim resulting from these types of losses. This is very important to know for the costs can be very high for this coverage and it will be mandatory from your bank.

Question 18

Can anyone buy Builders Risk Insurance?

Accepted Answer

For any insurance, there are terms that you have to adhere to. You have to meet some extra requirements to buy a Builders Risk policy. As a builder, you must have 2 years of experience in your field of expertise. Also, your project should have an insurable interest. When buying insurance, you have to provide basic information about your project to the insurance agency. One of our agents will tell you what information you need to provide. Just give us a call now (877) 960-0221.

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