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Builder's Risk Insurance
Course of Construction Insurance
Frequently Asked Questions

What is builder's risk insurance? What is course of construction insurance?
How is builder's risk insurance different from a homeowner's insurance policy?
Which insurance company will issue my policy if I am approved?
What are the specifics of the policy coverage if I am approved?
Do you cover theft of construction materials?
Will my policy be for replacement cost?
What does "all risk" mean?
Is builder's risk insurance renewable?
If homeowner's insurance is used to insure builder's risk, is it renewable?
Can I buy builder's risk insurance for the first time after I start construction?
Does builder's risk insurance include liability coverage?
Can I buy liability insurance for this construction project?
Who can I go to for advice on insuring my construction project?
My attorney said that a homeowner's policy provides sufficient coverage. Why don't you agree?
My lender requires "builder's risk insurance". Can you provide a mortgagee certificate?
Can a builder's risk policy insure a remodeling project?
How quickly can you bind coverage?
What kind of risks am I exposed to in building my own home?
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What is builder's risk insurance? What is course of construction insurance?
Builder's risk insurance and course of construction insurance are terms used interchangeably to describe one type of insurance policy that provides coverage against loss to real estate under construction or being remodeled.

Which insurance company will issue my policy if I am approved?
We use dozens of highly-rated nationally-known insurance companies. Click
here for a partial list of possible insurance companies.

What are the specifics of the policy coverage if I am approved?
If you read all of these FAQ's and read the
consumer disclosures, you will have a full understanding of the specifics of the potential policy coverage. Policy coverage cannot be discussed with you in detail until after you have submitted a complete application.

Do you cover theft of construction materials?
Yes. 99.9% of our policies cover theft of construction materials. You can assume that your coverage will include losses due to theft. We will advise you if you are not eligible for this coverage. If eligible, we typically do not limit this coverage except in situations such as: a named insured steals from himself or the missing material is discovered only when taking inventory. Any unusual or uncommon limitations will be fully disclosed. We know that Farmer's, Allstate, Statefarm, and many others do not cover theft of construction materials.

Will my policy be for replacement cost?
New construction is covered on a replacement cost basis. Remodel construction is covered as follows: the existing structure is covered on an actual-cash-value basis and the new construction is covered on a replacement cost basis. Insuring the existing structure on an actual-cash-value basis is an insurance industry standard. The existing structure cannot be insured for replacement cost.



How is builder's risk insurance different from a homeowner's insurance policy?
A homeowner's policy with a builder's risk endorsement (an HO3 policy, pronounced: "H" "O" "3") is sometimes used by insurance agents to insure homes under construction or renovation. Most such policies do not cover theft of your construction materials and are not renewable after 6 months. 99.9% of our builder's risk policies include theft coverage and are renewable for up to 36 months. A homeowner's policy with a builder's risk endorsement typically allows you to pay your premium in installments. Our builder's risk policies must be paid in full upon policy issuance. Our builder's risk policies do not "convert" to homeowner policies when construction is complete. However, we would be glad to help you with your homeowner insurance when your project is near completion. Just give us a call.

What does "all risk" mean?
It is a type of property insurance that covers losses resulting from each and every peril, except for those specifically excluded by the policy. Also known as "open peril" coverage. Typical exlusions are: earthquake, flood, war, and wind & hail (includes any type of "wind": hurricanes, tornadoes, twisters, etc). All of these coverages (except "war") can be added to your coverage for additional premium.

Is builder's risk insurance renewable?
Yes. But most homeowner's policies with builder's risk endorsements are NOT renewable. And if you lose your insurance coverage in the middle of the project, you will be unable to find replacement coverage since insurance companies will not offer coverage in the middle of a project unless they are renewing a current policy issued by the same insurance company. It is best to insure your project from the beginning with a builder's risk policy and not a homeowner policy with a builder's risk endorsement if there is any chance that your project will take more than 12 months.



If homeowner's insurance is used to insure builder's risk, is it renewable?
Our experience has shown that a homeowner's policy insuring a construction project is not renewable and is often cancelled mid-term once the insurance company inspector discovers that the insurance agent issued homeowner coverage for a construction project. (You can avoid this dilemma by verifying in writing that your homeowner policy (HO3 policy) will provide coverage for a home under construction or by purchasing a builder's risk policy instead.)

Can I buy builder's risk insurance for the first time after I start construction?
Sometimes. If you construction project is more than 30% complete, your application requires special underwriting handling. If your project began more than 7 months ago and/or is more than 50% complete, it may be impossible to find insurance coverage. The only option for coverage in many such cases is to bind coverage through your mortgage lender's insurance program. This option is very expensive: the mortgage lender's program typically costs eight (8) times more than if you had purchased the insurance coverage at the start of construction.

Does builder's risk insurance include liability coverage?
No, but liability insurance can be applied for separately.
Click here to get quotes and to apply online.



Can I buy liability insurance for this construction project?
Probably. Not all applicants will qualify for liability.
Click here to get quotes and to apply online to see if you qualify.

Who can I go to for advice on insuring my construction project?
We offer consulting services for a small fee. When you submit your application online, write in the comments box that you want to more information about our consulting services.

My attorney said that a homeowner's policy provides sufficient coverage. Why don't you agree?
Click
here for the answer to "How is builder's risk insurance different from a homeowner's insurance policy?"



My lender requires that I have "builder's risk insurance". Can you provide a mortgagee certificate?
Yes.

Can a builder's risk policy insure a remodeling project?
Yes. We can insure either 1) only the cost of the remodeling or 2) both the existing building and the cost of remodeling.
Click here to get quotes and to apply online.

How quickly can you bind coverage?
Over 90% of our applicants qualify for immediate coverage.
Click here to get an instant quote now!



BUILDER' S INSURANCE
By P. Edward Reale
Email: EReale@Suffolklaw.com

When a builder undertakes a projects he becomes involved not only with the party with whom he has contracted, but also with third parties and the public generally. It is, therefore, essential that the builder protect himself against claims that might arise by reason of his negligence, which may cause property damage and personal injuries to the public. The builder must also, of course, protect his employees through adequate workers compensation and make certain that the property, which he has contracted to build is also properly protected during the course of construction until it is finally turned over to the owner in a completed form. There are two basic policies of insurance that a builder must carry in order to fulfill his obligations and to protect himself: (1) comprehensive general liability, which insures acts that might cause damage to third parties, and (2) property coverage, which insures the labor and material that go into the structure.

TYPES OF COVERAGE AVAILABLE
Comprehensive General Liability Insurance: This type of insurance covers most liability exposures other than an automobile accident involving bodily injury and property damage. In addition to the general terms of the general liability policy, there are several other types of liability for which a builder may want to purchase additional insurance:
Contractual Negligence. Liability of a builder may exist not only for common law negligence, but also for contractual negligence. For example, the builder may agree to be responsible for acts perpetrated by the owner or by a subcontractor or by someone else over which the builder does not have control.
Strict Liability/Dangerous Activities. The builder may also be strictly liable for certain inherently dangerous activities, which render the builder liable, regardless of whether there is negligence. For example, if he is responsible for such tasks as blasting, storage of explosives, impounding water and drilling in congested areas, this type of additional coverage may be desirable.
Special Coverage. Where it is foreseen that the builder may be responsible for acts over and above common law negligence, special policy provisions should be provided for which additional premiums would have to be paid, for example, where negligent fuel storage in an equipment yard results in a fire that spreads to and destroys an adjacent building. The builder should explore with his broker or agent the nature of the coverage such as where construction operations might cause injury to members of the public (for example, a sudden gust of wind blows materials off the job site into the path of a vehicle); cause injury to employees of a subcontractor (for example, a wall collapses hurting employees of a subcontractor); or cause property damage to the public (construction debris is washed from a site by a rainstorm causing storm sewers to clog and back up water at a nearby building). Also, the builder should explore coverage for damage to mobile equipment (for example, where a back hoe operator backs equipment into a truck that is entering a job area and injures the driver). It is important to note that the general comprehensive liability policy is not an all risk policy. It is subject to various exclusions:
As a general rule, contractual liability assumed under any contract or agreement is excluded unless it is specifically covered for an additional cost under the policy.
Bodily injury or property damage arising from automobiles, aircraft or water craft is not covered and has to be protected by policies covering such specific items. Faulty work is not covered. There is no liability on the part of the carrier for the costs of inspections, replacements, repairs, or loss of use of work completed if work is withdrawn from use because of a defect or deficiency in the work.
There is no coverage for damage to underground property such as wires, conduits, pipes and mains.
Damage to property owned, occupied by, rented to, used by or in the care, custody or control of the builder who has purchased the insurance is not covered. This last exclusion is important; neither the insured's own property, nor any premises occupied by the insured is covered. Further, equipment being used that is either borrowed or rented is excluded, as is any property in the care, custody or control of the builder. It is very important to note that this exclusion encompasses property being installed or worked on, and might well include property of subcontractors on the job site that are controlled by the insured's general contractor.
Comprehensive Automobile Liability Insurance
Since comprehensive general liability coverage does not cover vehicles, automobile liability coverage must also be obtained. A builder can purchase coverage for all vehicles in one policy. A builder can purchase coverage for all vehicles in one policy. Builders should be sure that subcontractors carry adequate automobile liability insurance since the builder may be joined in a lawsuit for precarious liability, and if not fully covered, could sustain a personal loss.
Excess and Umbrella Liability Insurance
Umbrella liability policies sometimes simplify the question of how much liability insurance to buy. The coverage applies to overall liability exposure without regard to divisions such as automobile liability or employer's liability. Generally major limits of liability are provided with a minimum of $1,000,000 being a common limit. Coverage of umbrella liability policies applies in three ways: 1) insurance is provided on an excess basis for losses that are covered by primary insurance; 2) coverage applies to losses that are otherwise uninsured with the insured bearing the first $10,000, $25,000 or even $100,000 of uninsured retention. This protection fills gaps that may exist in primary insurance; and 3) The insurance is available when primary insurance is used up as when the annual aggregate limit of completed operations coverage is exhausted under a general liability policy. It is important to note that policies known as "excess" policies usually cover exactly in the same manner as the primary policy. That is, if there are any exclusions in the primary policy, the excess policy contains the same exclusions. However, umbrella policies are usually broader and cover for a dollar limit regardless of the liability which exists under the primary policy. Builders should discuss these distinctions with their insurance broker or agent.
Builders Risk Policy for Property Loss
These policies cover damages or destruction by fire, lightening, wind storm, hail, explosion, aircraft, motor vehicle, smoke, vandalism and malicious mischief. An "all risk" coverage provides coverage against all risks of physical loss or damage to the described property. Under a "stated perils" policy, the burden of proving that a loss occurred by reason of a particular peril rests on the insured. Under all risk insurance, the burden of proving any specific exclusion to the occurrence rests on the insurance company. Therefore, an all risk policy provides the insured with a simpler method of proving his case. Insurance should be carried by a builder for the full value of labor and materials entailed. The replacement cost of these materials and labor should be the amount of the insurance carried. There is an exclusion to general builders risk policies for any loss or damage caused by faulty or defective workmanship, or by defective, improper design or mechanical breakdown. However, resulting damage caused by these items is covered under the policy. It should be noted that not all policies give coverage for resulting damage. Some do and some do not; it is necessary to check the exclusions in each policy. Determining the nature and extent of necessary insurance coverage can be a complex issue. Anyone involved in the building trades should be familiar with the options or at least have a reputable broker or agent with which to consult. . . . . . TWOMEY, LATHAM, SHEA & KELLEY, LLP 631 727-2180



++ Builder's risk/Course of construction insurance covers ONLY your property; no liability coverage is included. You must meet underwriting guidelines for immediate coverage. Once you submit your application, you will be immediately advised of whether or not you qualify for immediate coverage. We have no maximum insurance limit. Property located on barrier islands may be be referred to its wind and hail insurance policy for wind and hail damage claims if a wind and hail policy was purchased. "Wind and hail" damage includes hurricanes, tornadoes, twisters, wind, and hail. The states that provide wind and hail pools are Florida, Georgia, Mississippi, North Carolina, South Carolina and Texas. Coverage on property located within 1,000 feet of tidal water or on a barrier island cannot be written using our instant-issue insurance policy unless you are eligible for wind and hail coverage with your state's wind pool. Otherwise, properties not eligible for wind and hail coverage with the state's wind pool will take three (3) days to three (3) weeks to underwrite. Coverage will be limited to the original policy period even if your construction project is finished early.

Builder's risk/course of construction policy premiums are not refundable for any reason. They are also not partially refundable when the construction project finishes early. All applicants, payors, and/or representatives who submit an application or remit payment for an application for this insurance coverage will be responsible for all collection costs, including but not limited to attorney's fees and costs, in the event that any payment is denied by the issuing bank, credit card issuer, and/or any other credit issuer used to fund the payment of the premium. Uncollectable amounts incur an interest rate of 18% annually. Any applicant, payor, or representative or any representative tied to the mortgage lending, construction loan lending, or construction profession who makes application or remits payment under any false pretenses or who directs anyone else to make application and/or remit payment for this coverage under false pretenses of any kind will be reported to their state's regulators and will be held responsible for all damages, including but not limited to attorney's fees and costs and interest fees of 18% annually on any uncollected amounts, suffered as a result of their actions.

If your project is not yet complete before the original policy period, your policy may be renewed. Some insurance companies may not offer a renewal in some cases or may renew for only three or six months or may renew for no less than 12 months at a time. You will be advised of your renewal options before you make your final builder's risk/course of construction purchase. However, renewal options cannot be determined for certain until 30 days before the renewal date.

Theft of construction materials is not excluded in 98% of the policies that are issued. You will be advised if theft is excluded before making your final purchase.

Sample policies are not provided. Preliminary information can be provided about your potential insurance policy coverage during the quote process, but detailed information can be provided only AFTER a properly-completed application has been submitted and reviewed by an underwriter.




Terrorism Coverage: If terrorism coverage is not automatically included with the policy to which this quote applies, you are hereby notified that under the Terrorism Risk Insurance Act of 2002 ("The Act"), you have a right to purchase insurance coverage for losses arising out of acts of terrorism, as defined in Section 102(1) of The Act: The term "act of terrorism" means any act that is certified by the Secretary of the Treasurey, in concurrence with the Secretary of State, and the Attorney General of the United States - to be an act of terrorism; to be a violent act or an act that is dangerous to human life, property; or infrastructure; to have resulted in damage with the United States, or outside the United States in the case of an air carrier or vessel or the premises of a United States mission; and to have been committed by an individual or individuals acting on behalf of any foreign person or foreign interest, as part of an effort to coerce the civilian population of the United States or to influence the policy or affect the conduct of the United States Government by coercion. You should know that coverage provided by the policy offered in this quote for losses caused by acts of terrorism, as defined in The Act, is partially reimbursed by the United States under a formula established by The Act. Under this formula, the United States pays 90% of covered terrorism losses exceeding the statutorily established deductible paid by the insurance company providing the coverage. The premium for this coverage is 2% of the developed premium or $100.00 whichever is greater except in the state of Florida where the premium is 1% of the developed premium and no minimum applies, except in the state of Georgia where the premium is 1 1/2% of the developed premium and no minimum applies, and except in the state of Washington where the premium is 2% of the developed premium and no minimum applies. The premium charged for this coverage does not include any charges for the portion of the loss covered by the Federal government under The Act.




Insurance Fraud: ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE COMPANY OR ANOTHER PERSON FILES AN APPLICATION FOR INSURANCE OR STATEMENT OF CLAIM CONTAINING ANY MATERIALLY FALSE INFORMATION OR CONCEALS FOR THE PURPOSE OF MISLEADING INFORMATION CONCERNING ANY FACT MATERIAL THERTO, COMMITS A FRAUDULENT INSURANCE ACT WHICH IS A CRIME AND SUBJECTS THE PERSON TO CRIMINAL AND CIVIL PENALTIES (IN NY: SUBSTANTIAL CIVIL PENALTIES). Not applicable in CO, HI, NE, OH, OK, OR or VT. In DC, LA, ME, TN, and VA: insurance benefits may also be denied.


































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