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From the Front Lines: Builders Risk

“Most recently, the biggest change has been the increase in building material costs,” says independent agent Gus Brabham on builders risk. “Making sure that the policies that are put into place consider the higher cost to rebuild as the project moves along has been important.”
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From the Front Lines: Builders RiskGus Brabham

Partner

Brabham Griffin Insurance

Columbia, South Carolina

How did you get started at your agency? 

A family friend, Frank Norris, hired me right out of college 27 years ago. I started in insurance with no prior experience. He was a fantastic mentor and teacher, and he had a niche in insuring home builders. I just jumped on those coattails and worked for him. That agency was ultimately sold, so I stayed on with the firm that bought us until it was sold again. That is when my partner, Bennett Griffin, and I started Brabham Griffin Insurance in 2018.

Why did you get into builders risk insurance? 

It was a natural fit for insuring home builders. In South Carolina, we have a lot of coastal builders that we insure. Having the right builders risk markets has always been very important. The builders value and appreciate what we do for them.

Biggest changes in builders risk? 

Most recently, the biggest change has been the increase in building material costs. So, making sure that the policies that are put into place consider the higher cost to rebuild as the project moves along has been important.

Another area that we have had to be aware of are homes that may not get finished in the first 12 months of the policy period. In the past, people were accustomed to typically finishing houses, depending on the size, in six to twelve months, but now they may be taking much longer because of a shortage in supplies or labor deficits.

Biggest challenges?

In the current climate, making sure that we have the appropriate coverage in place is our top priority. And with coastal exposures, it is important that we constantly keep our eyes open for new markets that are willing and able to write policies based on wind exposure and other types of associated risks.

With the constant fluctuation in carrier appetite in builders risk, you have to be able to adapt to who is competitively priced and who is providing the best coverage.

Future trends? 

With remodel jobs, we need to be aware of whether the policies are going to cover the existing structure, or only the new, additional structure that is being built. Often, homeowners may think that their homeowner's insurance policy will cover the existing house, but it's imperative that they check to see whether their policy would respond if the house is vacant or if it's under construction.

Advice for a fellow agent regarding builders risk? 

Know the carriers that you are working with and their coverages, including these key questions: Does it cover building materials and to what limit? What about property owned by subcontractors? When does the builders risk coverage end? Can it be renewed and for how many times? Does your policy have an option to include the profit?

One of the other important things I always talk to my clients about are the deductibles and how do they apply? If you're insuring the builder and the homeowner goes out and buys a builders risk policy on their own, make sure everyone knows who is going to be responsible for the deductible. Whether it is the builder or the homeowner, it needs to be clearly spelled out in their contractual agreement. It is good practice to make sure that the builder has the proper coverages to include building materials for the job site, as some policies will have a fixed limit and others may go up to the value of the structure. 

What's your favorite success story regarding builders risk insurance?

We had a house that was under construction and was nearly finished a few days before closing—and it burned to the ground. It was discovered that some painting supplies left in a bucket had spontaneously combusted. Our policy stepped in and reimbursed the builder for the loss.

AnneMarie McPherson is IA news editor. 

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Friday, October 29, 2021
Builders Risk