The Fine Print of Builder’s Risk Every Contractor Should Master

If your client has builder’s risk insurance, it’s time to look at the fine print. These little overlooked details can save your client or make their day stressful. Paying attention to these details will help you and your client in assessing whether they are comprehensively insured or not. Trust us! You don’t want your clients to be underinsured. Remember, construction entails a large budget. When a disaster happens during the project, and your client isn’t appropriately insured, you might lose their trust. So, here are the most common details that you and your client shouldn’t overlook.  

Expected Date to Complete

More often than not, the anticipated completion of the project doesn’t coincide with the policy expiration. Most projects have some sort of delay in completing the construction activities. So, when you apply your client’s builder’s risk, always look for that detail in the project contract. Don’t use the policy date of expiration, which most agents make a mistake of doing. If you can’t find it, the most practical thing to do is ask your client. Now, your client might ask why you are asking for this detail. Your client must understand the importance of this one critical detail. This date triggers the coverage of New York Builder’s Risk Insurance. Most of the time, a construction project involves time-element coverage. If the date of completion is incorrect, your client is at risk of not having the coverage. Worst, this circumstance can trigger a loss. In short, confirm this tiny detail before submitting the builder’s risk application. Your client expects you to do extraordinary diligence to deliver quality service. This act is one of them, checking the anticipated completion date.

Soft Costs and Hard Costs Computation

These costs differ from one project to another and are important in determining insurance coverage. So, your client must be able to provide you an accurate estimate of soft and hard costs.

But what are these costs?

Hard costs refer to the direct expenses related to the construction of the building. These include labor and materials. Example of hard costs are:

• contractor costs such as profit, labor, and overhead,
• Subcontractors for plumbing, electrical, and HVAC,
• Materials with shipping costs (plants, fixtures, finish materials).

These costs are often tangible, and you can see their physical manifestation on the project. Soft costs are indirect expenses but are important in completing the project. Examples of these costs are:

• Architectural service fees
• Engineering service fees
• Site analysis (survey and geotechnical)
• Financing and legal fee
• Landscape designing fees

A physical manifestation may be present in some aspects of soft costs. These costs are intangibles, but they add value to the project. Failure to compute this accurately can backfire on your client. Instead of getting full coverage, they may end up paying the out-of-pocket costs when unexpected claims arise.

Date When the Coverage Ends

Your client must understand the difference between policy and project completion dates. At the same time, you should make sure that your client is fully covered. So, when does the builder’s risk coverage end? Here are some triggers that your client should know, too, whichever comes first:

• Cancellation or expiration of the policy
• Cessation of your client’s interests
• The owner accepts the building
• Property already leased
• Abandonment of project with no intention to finish
• Property insurance becomes permanently applicable
• The building was occupied for 60 to 90 days.

This list is not exhaustive, so that other coverage terms might be included and specified in the policy. The critical part is explaining to your client about these coverage terms. Remember, these terms may vary a lot. So, help your client understand each term and how it affects their building projects. Also, document this explanation. If possible, ask your client to sign a copy (digital or print) confirming that they understood these terms based on your explanation. Transparency on both parties is essential for a successful business partnership when it comes to insurance policies.

Conclusion

Deliver value and quality service to your clients by mastering these three details. These may seem typical and mundane but overlooking their significance in the policy contract is dangerous. Earn their trust and build a long-lasting relationship by taking the extra effort to explain these builder’s risk fine prints in detail.

About Snyder Specialty

Snyder Specialty, LLC is a New York-based underwriting facility that provides a range of property and liability solutions for personal and commercial lines. Specializing in coastal properties and hard-to-place risks, Snyder Specialty expands your current capabilities with proven solutions for complex risks. Find out more about the company’s range of services by calling (718) 362-8039.