Explains Builders Risk
Sadler Builders Risk Insurance Program
Instant Online Builders Risk Insurance Quote For Home Builders, Remodelers, and Commercial Contractors
Explains Builders Risk
For Homebuilders, Remodelers, And Commercial Contractors Who Want The Best Possible Builders Risk Insurance At The Lowest Possible Cost And The Least Amount Of HassleThe Sadler Advantages
John M. Sadler
Contractor Insurance Specialist
John M. Sadler, President of contractor-insure.com (a division of Sadler & Company, Inc.) graduated Magna Cum Laude and Phi Beta Kappa from the University of South Carolina in 1983 with degrees in Insurance and Finance. He graduated from the University of South Carolina School of Law in 1986. He has served on the board of directors of the Home Builders Association of Greater Columbia and is a published author and speaker on contractor insurance and risk management topics. You can take advantage of his experience and expertise in protecting your business at the lowest possible cost.
Builders' Risk provides temporary property insurance to protect the house while it is under construction against the perils of theft, vandalism, fire, windstorm, etc. Coverage should start on the day the materials are delivered to the jobsite and normally ends when the house is accepted as complete by the owner or occupied by the owner or a tenant. The quality of Builders' Risk coverage varies greatly by insurance company and you should insist that your policy covers theft of building materials before they are permanently attached, collapse, and reasonable profit. A separate Windstorm policy should be purchased in Beach Zones. Also, a separate Flood policy must be considered for all starts susceptible to flooding.
It is strongly recommended that you should take out the Builders' Risk Coverage on a custom job instead of leaving it up to the homeowner. If you leave it up to the homeowner, they may forget to take it out or they may buy a policy with inadequate coverage. Imagine how it would feel to frame a large house and have it collapse during a windstorm (before it can be properly braced) and then to find out that the homeowner's policy did not cover "collapse."
The better Builders Risk programs allow coverage to be extended to model homes and model home contents. In addition they allow re-reporting of an unsold home in inventory for a second year at no increase in rate.
There are four basic ways to structure a Builders Risk policy
A Single Shot is a separate Builders Risk policy issued on each house being built. There is a minimum premium (usually $350) and there is no refund if the house is completed before the policy expires. The builder must provide all of the specifics on the house (street address, construction, square footage, etc.) before the policy can be issued.
This type of policy is usually issued for builders doing custom construction with high values, or builders with five or fewer homes per year. This policy is not recommended for volume builders. The disadvantages to the single shot are: builder could forget to call his agent to have the policy issued; more communication required between the builder and his agent (must supply Information to agent each time in order to complete the application and secure coverage), no coverage if policy is not issued and rates are usually somewhat higher. This can be an administrative hassle for volume builders.
Monthly Reporting Form - Monthly Rate
The builder completes a report each month listing all of his existing inventory for the prior month. The builder applies the rate to the total inventory values and computes his monthly premium charge and sends his check to the insurance carrier along with the monthly report. Once a house is completed/sold it is no longer listed on the next monthly report. The advantage to this type of policy is the rate is lower and the builder pays less if he is able to complete the house in under 5 months. He also doesn't have to contact his agent each time a new house is started. This type of policy works well for volume builders who turn over houses quickly.
The disadvantage is keeping up with the inventory each month and remembering to list each house in progress
Monthly Reporting Form - Annual Rate
The builder completes a report each month listing all new starts for the prior month. The builder applies the rate to the total value of all new starts and computes his monthly premium charge and sends his check to the insurance carrier along with the monthly report. The new starts are covered for 12 months, and don't need to be reported again unless construction isn't finished by the end of the 12 month term. This policy works well for builders who usually take more than six months to complete their houses.
The advantage to this policy is that the builder doesn't have to list his entire inventory each month; only new starts need to be reported. Also, the builder doesn't have to contact his agent each time he starts a new house.
The disadvantage is that monthly reports still have to be completed.
Blanket Annual Deposit
This is the easiest of all Builders Risk policies. The builder estimates the completed value of the number of new starts anticipated for the coming 12 months plus homes that will be in existing inventory for more than 12 months. The insurance company applies the rate to the total estimated annual values. Most insurance carriers offering this type of policy offer a payment plan. The policy is subject to audit at the end of the policy term. If the builder starts more houses than originally anticipated, or fewer than anticipated, the difference is picked up during the audit.
This type of policy greatly reduces the administrative hassle of other types of policies, and also eliminates the risk of not remembering to report a new start and going without coverage.
Money Saving Tip
Many builders unnecessarily overstate the values to insure which results in significantly higher premiums. Most builders risk coverage forms do not require builders to insure those costs that are not subject to loss or that would not have to be incurred again as a result of a total loss. Examples of these costs that may be deducted from the estimated completed values include real estate sales commissions, closing costs, water taps fees, sewer taps fees, blueprints, engineering studies and land clearing/grading. In addition, the builder may also deduct profit as long as the builder does not expect to be reimbursed for lost profit upon filing a claim.
contractor-insure.com, a division of
Sadler & Company, Inc.
3014 Devine St.
PO Box 5866
Columbia, SC 29250-5866
Toll Free (800) 622-7370 Local (803) 254-6311
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