Help! Home Construction Started & I Don’t Have Builders Risk Insurance

“But, we already started construction. You mean you CAN cover that?”

A client looks at you skeptically, but with a glimmer of hope in their eyes.

Being able to say yes to a contractor or homeowner who needs builders risk coverage — even when construction is already underway — can make an insurance agent feel like a superhero.

Eager to save the day for your clients?

Let’s first explain how to calculate the percentage complete. Here’s the formula:

Amount Spent To-Date / Total Completed Value = % Complete

Now that you know how to determine the percentage complete for a commercial or home construction project, let’s discuss underwriting guidelines.

With the Builders Risk Plan insured by Zurich, projects up to 30 percent complete will generally flow through our automated online application. Projects over 30 percent complete require additional underwriter review by our dedicated, in-house team, (and another pair of eyes never hurts when it comes to protecting your clients’ investments). Providing the correct percent complete on the builders risk application is critical to not only to the underwriting process but at claims review should there be a disaster. Learn more about our application and quote process.

Now that we’ve covered the basics, here are three scenarios when home builders and owners might ask for residential builders risk coverage after construction is already underway:

Scenario #1: Holly Homeowner hired Chuck Contractor to build her new $500,000 house. This is the first time Holly has had a home built, and she assumed Chuck would be responsible for securing the builders risk insurance policy. Chuck thought he’d asked Holly to purchase the policy, but doesn’t have any record of the conversation. He has already poured the foundation for the new home and has almost finished framing, for total spend of $75,000 so far. Realizing that Chuck hadn’t secured course of construction coverage, Holly calls you frantically asking if anything can be done. Do you think you can cover it?

Answer: Most likely, yes!

This house is currently only 15 percent complete. Provided the rest of the project details are straightforward, you would likely be able to secure builders risk insurance for Holly and have the submission flow through our online policy issuance system without a hold.

Scenario #2: In the thick of her busiest time of year, Connie Contractor is building White Fan Subdivision, with one of the homes already at 40 percent complete. One day, as she takes a break at the jobsite, she gets a call from Barney Banker asking for a copy of the builders risk policy. Connie’s heart skips a beat. She completely forgot to let you (her agent) know she was working on a new project! She calls you and asks if she can still get coverage for the new home construction. What do you say?

Answer: There’s a good chance!

Because the structure is 40 percent complete, additional underwriting review will be required when you submit the application online. Provided other aspects of the project meet underwriting guidelines, Connie could be covered. If Connie will be the contractor for the other homes in the White Fan subdivision, we may also recommend securing a policy type other than a one-shot for her needs like Reporting Form or Deposit Premium.

Scenario #3: Hunter Homebuilder is self-funding the construction of his new home, and is 80 percent complete. Coming to the end of his funds, he decides to take out a bank loan to complete construction. However, the bank wants him to secure builders risk coverage before they will offer the loan. Hunter found your business card at his local home improvement store and calls you to secure coverage. What do you say?

Answer: Because the new home construction project is 80 percent complete, the application would be placed on an underwriting hold. Unfortunately, it’s very possible this may no longer qualify for coverage.

US Assure recommends that anyone looking to perform a construction project reach out for insurance before they begin the project, even when self-funding it, to avoid this type of situation. After all, not all risks that have started will be eligible, especially when they’re 80 percent complete.

Whether you get to save the day in a clutch situation or have to be the bearer of bad news, these insights mean you deliver more value to your clients as an informed insurance counselor they can trust to give them straight talk about their property investments.

Determining when coverage can and should be issued is just one part of the puzzle. Learn more about course of construction coverage for new home construction when you download our FAQ, Answering Agents' Top Builders Risk Questions: Residential New Construction.

This is intended as a general description of certain types of insurance and services available to qualified customers. Your policy is the contract that specifically and fully describes your coverage. The description of the policy provisions gives a broad overview of coverages and does not revise or amend the policy.