Whether you are securing coverage for personal lines or commercial lines clients, agents servicing course of construction accounts must grasp the importance of timing.
Builders risk insurance covers materials, fixtures and equipment installed during the renovation or construction of a structure. Coverage is triggered if any of those items undergo physical loss or damage from a covered cause. Whether clients are personal lines or commercial lines, agents servicing course of construction accounts must grasp the importance of timing when it comes to securing coverage.
Generally, coverage should begin when building materials are delivered to a construction site. That requires the agent to stay in close contact with their client—especially as supply chain hiccups can delay the manufacturing and delivery of plumbing, electrical, lumber and other building materials.
However, being too early costs the client money. Securing an effective date before the owner or contractor is ready to begin building or remodeling starts the policy clock without insuring anything. By contrast, being too late can mean a shortage of coverage and an insured not having coverage for a loss that happens prior to policy inception.
In many cases, funding from a bank or other lending institution dictates the timing and coverage requirements. Oftentimes, a lender expects coverage as a condition of closing the loan. This means the policy inception date is the same as the loan's closing date.
In some instances, construction does not start on time due to unforeseen delays. If this is the case, the agent could request a cancelation and then issue a new policy—with the lender's consent—with a revised effective date. The policy term is then reset. If this can't be accomplished, the agent can let the policy term run its course, aiming to renew it. In this instance, it's important to select a provider who offers renewal options for the type of project.
If construction begins without coverage, there's a lot of risk. Some builders risk carriers won't insure projects that are already underway. Most likely, additional underwriting will be required, which delays coverage and could result in the submission being declined.
On top of that, the client won't have coverage for a loss. One example is if building materials are delivered to a construction site and they are stolen. If a policy wasn't secured, there's no coverage for the replacement materials.
When securing a policy, it's also helpful to know the project's anticipated completion date, which is based on the length of time it takes to finish the job, not the scheduled policy term. Conversing with the client and reviewing the construction contract are the best ways to determine it.
The most important advice for independent agents is to stay in close contact with their clients, be curious about their projects and ask questions to ensure they get a policy with the right coverage.
Mary Stiglic has over 30 years of experience and is a marketing manager at US Assure, which exclusively distributes, underwrites and services Zurich's builders risk insurance program across the U.S.