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UNDERSTANDING BUILDERS RISK INSURANCE COVERAGE: WHEN IT BEGINS & ENDS
At American Eagle Insurance, we understand that knowing the details of the coverage you provide is crucial for protecting your clients. Much like being familiar with your car’s manual, understanding policy terms may not seem exciting, but it’s invaluable when unexpected situations arise.
Two of the most fundamental aspects of builders risk insurance are knowing when coverage begins and when it ends. These details directly impact your client’s protection during construction projects, making them essential to understand and communicate.
WHEN DOES BUILDERS RISK COVERAGE BEGIN?
Builders risk insurance is designed to protect materials, fixtures, and equipment to be installed during the construction or renovation of a structure. It’s vital to have coverage in place as soon as materials are delivered to the job site—not just when vertical construction begins. If site work coverage is included in the policy, coverage should start before any site preparation begins.
KEY COVERAGE FORMS OFFERED BY AMERICAN EAGLE INSURANCE
Form A: Residential and Commercial Projects Up to $10 Million
Coverage begins when the insured becomes legally responsible for the property after the effective date of the policy and all other conditions are met.
Form B: Commercial Projects Up to $75 Million
Coverage begins when the insured’s property is at risk starting on or after the policy’s effective date. Coverage is conditional and subject to the terms outlined in the policy.
Both forms are structured to ensure seamless protection, but the scope and scale of the projects they cover differ, allowing for flexibility based on the client’s needs.
WHEN DOES BUILDERS RISK COVERAGE END?
The end of coverage varies depending on the policy form and the specific terms outlined. While there are similarities between forms, the conditions under which coverage ceases can differ, particularly for occupancy restrictions.
COMMON TRIGGERS FOR COVERAGE TERMINATION
- When the property is occupied or put to its intended use.
- Once ownership is transferred, or the contractor has been paid in full.
- When the policy expires or is canceled.
- For residential properties, after a specified time period following occupancy or construction completion.
- For commercial structures, once a certain percentage of the property is leased or rented.
It’s critical to educate clients about these conditions to prevent gaps in coverage. For example, allowing tenants to occupy a building or storing goods in a warehouse before construction is officially complete may prematurely terminate the builders risk policy.
REAL-LIFE EXAMPLES OF COVERAGE TRIGGERS
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Commercial Warehouse: A client with a builders risk policy begins storing goods in a warehouse before construction is complete. Since the property was put to its intended use, the builders risk coverage ends.
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Custom Home: A family purchases a newly built home but delays moving in for a month. Coverage ceases upon transfer of ownership, leaving the new owners responsible for securing a permanent or vacant property policy.
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Office Building: A commercial client achieves 50% occupancy in a newly constructed office space. While the percentage of occupancy may still be within allowable limits, the 90-day coverage limit following completion means the policy has expired.
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Residential Property: A homeowner allows a family member to temporarily occupy a newly constructed home to safeguard appliances during the final month of construction. If occupancy is brief and within the policy’s terms, coverage may still apply.
WHY IT'S IMPORTANT TO STAY INFORMED
Because builders risk insurance includes nuanced triggers for the beginning and end of coverage, staying informed and educating clients about these conditions is vital. Ensuring proper coverage prevents disputes and claims denials, helping protect clients’ investments and avoiding potential liability issues.
A GENERAL OVERVIEW
This information is intended to provide a broad overview of builders risk insurance. Policy terms, conditions, exclusions, and availability vary and are subject to change. Refer to the specific policy for a complete representation of the coverage provided. At American Eagle Insurance, we’re here to help you navigate the complexities of builders risk insurance and secure the best protection for your clients.
For more information or to request a quote, contact American Eagle Insurance today.
Builders risk insurance is essential for any individual or entity with a financial interest in a construction or renovation project. This includes:
- Contractors: Protecting tools, equipment, and materials during the building process.
- Homeowners: Safeguarding their financial investment in custom builds, renovations, or home additions.
- Developers and Business Owners: Covering large-scale commercial projects and the assets involved.
- Financial Institutions: Ensuring loans tied to construction projects are secured against unforeseen risks.
Depending on the terms of the construction contract, builders risk insurance can be purchased by the owner, contractor, or both. Additional insured parties, such as subcontractors, may also be covered under the policy.
Builders risk policies offer broad protection against various risks. Common coverage includes:
- Property Damage: Safeguarding the structure under construction from fire, vandalism, theft, and other perils.
- Materials and Equipment: Covering items on-site, in transit, or stored temporarily.
- Soft Costs: Protecting against delays and associated costs, such as lost income, extra expenses, and interest on loans.
- Valuable Papers: Ensuring documents such as blueprints or permits are protected.
- Ordinance or Law Compliance: Covering the costs of adhering to updated building codes during reconstruction.
- Pollution Cleanup and Debris Removal: Ensuring quick recovery and cleanup after an incident.
- Scaffolding and Construction Forms: Providing coverage for equipment essential to the building process.
Optional endorsements, such as flood and earthquake coverage, are also available in certain locations.
At American Eagle Insurance Agency, we bring over 50 years of experience to every policy we write. Our builders risk insurance offers unparalleled benefits:
- Flexible Policy Options: Choose from single-project, blanket, or reporting-form policies to fit your needs.
- Comprehensive Protection: Coverage for a wide range of risks, ensuring your project is protected from start to finish.
- Expert Guidance: Our team works with you to assess your project’s risks and recommend the best coverage options.
- Quick and Easy Setup: We make it simple to get your policy in place, with fast approvals and responsive support.
- Adaptability: Our policies can be endorsed to account for changes in total project value during construction, ensuring no gaps in coverage.
