Residential builder’s risk insurance form is one of the most commonly issued forms during the construction of a custom home or home remodeling for construction coverage. The insurance covers all exposures from the time a nail is hammered in a home until the finish of remodeling or construction.
Whether your client is an owner, home builder, house-flipper, a development company, or investment company, a comprehensive residential builders risk policy for their new home construction or home remodeling project is required. The policy is present at the end of a reporting or completed value form. There is no standard contract form or a policy to fill out as such.
Ways to structure a builder’s risk policy
- A Single Shot Builder’s Risk Policy
This policy is separately created on each house that is under construction. It costs a minimum premium (usually $350) and does not give a refund in case the house is completed before the policy expires. The agreement is issued after the builder provides all necessary details of the house like the street address, construction dimensions etc.
This policy is not made for volume builders. This is usually recommended for builders building fewer homes per year.
- Monthly Reporting Form – Monthly Rate
This policy works on a monthly basis. The builder has to give a report every month for the previous month’s inventory. The builder applies the rate to the total inventory values and computes his monthly premium charge and sends his check to the insurance carrier along with the monthly report.
After completion, the house is no longer listed on the monthly report for next month. This contract has the advantage of a lower rate. The builder pays less if the house is completed in under 5 months.
Also, the agent need not be contacted repeatedly each time a new house starts. This policy is good for volume builders. The only disadvantage is keeping a track of the inventory every month and listing each house in progress.
- Monthly Reporting Form – Annual Rate
Similar to the previous one, the builder fills a report each month listing all new starts from the prior month. Then he applies the rate to the total value of all new starts and computes his monthly premium charge
The advantage; that the builder does not have to list the inventory every month only the newly started projects to be reported. There is also minimum interaction between builder and the agent each time he takes up a new house.
The disadvantage; the builder still needs to complete his monthly reports.
- Blanket Annual Deposit
A comparatively easy policy amongst all builders risk policy. The builder has to calculate the complete estimated value of new projects that he thinks will start in the coming 12 months; plus give a record of the homes that will be in inventory for above 12 months. The insurance company then applies the rate to the total estimated annual value. This is the most common payment plan.
This policy reduces a lot of hassles for the builder and the policy makers.
These are the common ways of creating a builders risk insurance quote. You should compare and decide which policy will suit you the best for you. There are a lot of companies that give quotations and can be taken into consideration while choosing the best policy.
