How to choose the best builders risk policy

[David Michael]

I get a feeling that my local insurance agents always take advantage of my ignorance. How do I choose the best coverage? I'm a developer and majority of the work is either gut renovations or new constructions.

[Carl Feldhaus]

@David Michael I lead the Pacific Northwest for Builders Risk as an Underwriting Manager, there are various things to consider when looking for builders risk.

Underwriters will want to see: Gantt Chart (Schedule), Budget Breakdown by Division, Site Plan and Elevation Drawings, and GeoTech Report. These items that are available to you and GC are very very helpful to make sure all are on the same page.

You will want to include:

- Term of Coverage Needed (Start and End Date)

- Construction Material (Wood Frame vs Steel Frame example)

- Occupancy of Building

- Stories Above and Below Grade

- Sqft of Building

Quick Thoughts that should be helpful:

- Start of a Builders Risk Policy: You typically want to start a builders risk when you are mobilizing or when you have materials at site, whichever start first.

- Do you want Earth Movement, Flood or Named Windstorm Coverage, what sublimit will you be looking for if so.

- Do you want Delay in Opening Coverage? Loss of Rents or Soft Costs coverage should you have a covered loss. I can talk through these more but Soft Costs are typically the intangible costs that you might want to cover in the event of a covered loss that you might incur above and beyond what was included in the original budget. You will want to know what you are looking to cover in this area and the period of indemnity. Loss of Rents is more simple, but if asking for this coverage want to provide a Pro-Forma of what you are estimating for the Rental, ideally Net/Gross and Per Month. Many Pro-Formas will show that rental income once they open its a build-up to income over the first few months with it leveling out after a few months of opening.

- If it's a renovation Job and a very large job, there is a consideration to cover the Existing Property on the builder's risk policy, my rule of thumb is if the Existing Property Values are 25% or less than the Renovation/TI Job then it makes sense to consider including in the Builders Risk Policy, otherwise I suggest to keep on the Property or Package Policy. Consideration of Existing Property we would want to know Condition of the Building, has it been vacant, what will the occupancy be before/after reno, and valuation. Valuation is important since we are insuring, a Marhsall Swift is acceptable but you want to make sure you're on the same page.

- Permission to Occupy should be included in the Form, some forms do not

- No Coinsurance, not as common but it's out there

Any questions or example please feel free to reach out anytime, I don't mind being a resource!