Unsold Dwelling vs. Builders Risk Insurance for New Homes

Unsold Dwelling vs. Builders Risk Insurance for New Homes

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6 min

“Why would a builders risk client need an unsold dwelling policy for a new home?”

We get our fair share of questions about it, especially when it comes to the difference between unsold dwelling and the Zurich Builders Risk Plan. We often refer to unsold dwelling as a third-year policy that you might tack on to the end of two years of coverage with the Zurich Builders Risk Plan. But the reasons you might use one policy or the other can vary.

Let’s walk through the main features of each so you can more confidently discuss options with a personal or commercial lines client.

What does it cover?

Builders Risk Insurance

Builders risk insurance is also referred to as course of construction coverage. It protects a person's or organization's insurable interest in materials, fixtures and/or equipment that is awaiting installation, should those items sustain physical loss or damage from a covered cause.

The exact coverages and limits will vary by project type and value. But generally speaking, the Zurich Builders Risk Plan offers coverage for fire, theft and vandalism, as well as a broad selection of additional optional coverages for purchase, including soft costs, flood, windstorm, earthquake, and business income and extra expense. Builders risk policies may also cover damage to construction material, temporary structures, property in transit, fencing, scaffolding, subdivision signs and landscaping.

Unsold Dwelling Policy

Unlike builders risk insurance, which is designed for the entire course of construction, the unsold dwelling policy insured by Zurich provides coverage for new construction that’s either near completion, or complete and waiting for sale. Coverages for this unsold dwelling policy typically include damage due to fire, lightning, windstorm, hail, explosion, hidden decay, weight of snow, ice or sleet, and more.

Registered producers can compare the coverage forms of these two property policies when you log in. You can locate the forms under our Forms Library.

Who is eligible?

Builders Risk Insurance

A builders risk insurance policy can be purchased in the name of your personal or commercial lines client — from property owners to builders, contractors, house flippers, development companies, retail companies and school districts. Learn more about eligible clients.

Unsold Dwelling Policy

Eligibility for residential course of construction clients seeking the Zurich unsold dwelling policy is narrower, limiting coverage to new construction. Homebuilders and homeowners whose completed brand new home was previously insured by a Zurich builders risk policy during construction may be eligible for unsold dwelling coverage, as long as they intend to sell and not rent the completed structure.

And if you need an unsold structure policy for other circumstances like a commercial building or after a tenant leaves the property, we have a policy for that, too.

When should agents secure the coverage?

Builders Risk Insurance

Builders risk insurance is a time of need policy, which means you need access to quote and issue as soon as your clients know they need coverage. Your clients expect a quick turnaround, and some might even need proof of coverage to secure a construction loan. As a general guideline, course of construction coverage should be secured before a project begins. While we may be able to insure a project in progress, other factors (such as the percent complete) come into play.

Unsold Dwelling Policy

When residential new construction projects are almost complete, waiting for sale, or clients are nearing the end of two years of coverage under the Zurich Builders Risk Plan, insurance agents can apply for unsold dwelling coverage to protect the finished unoccupied home. The policy may also be available for the second year.

And if your homebuilder is insured under our reporting form, they can secure up to two years of unsold dwelling coverage. Just keep in mind that unsold dwelling coverage under the Zurich reporting form is fully earned premium.

Additional Details

Between unsold dwelling and builders risk insurance, there are differences in coverage and cost. A builders risk policy offers more comprehensive coverage designed to protect clients’ interests during the course of construction. And because the property value is a lot higher when the project is nearly complete, the cost of unsold dwelling insurance is typically greater. Lastly, while a residential builders risk policy for new construction is fully earned, an unsold dwelling policy for a single new construction home offers pro-rata cancellation.

When weighing the pros and cons of purchasing an unsold dwelling policy for the second year of coverage versus another year of builders risk insurance, be sure you and your client grasp the implications. Let’s say your client is approaching the end of their first policy term for builders risk and think they only need another three months of coverage. Transitioning to an unsold dwelling policy might be on your mind. It may seem that there is a potential to save money by only paying for three months of unsold dwelling coverage versus another year of builders risk. Assess the circumstances before you jump into to the unsold dwelling policy.

If they opt for unsold dwelling coverage instead of a second year of builders risk insurance, they could end up paying more for less coverage. Remember, you can request a second policy term for builders risk if a project is complete at the end of its first year of coverage but hasn’t been sold. Be sure to consult our coverage form to know exactly when coverages begins and ends.

When the two years of protection under the Zurich Builders Risk Plan are over and clients need a third year, consider unsold dwelling. For higher value residential new construction (around $8 million or more), a third year of builders risk coverage may be available with underwriting approval.

No matter which policy your client qualifies for, review the applicable coverage forms with them to ensure you both understand the scope of coverage offered.

Not sure how other carriers stack up to the Builders Risk Plan insured by Zurich? Complete our free checklist to compare coverages.

This is intended as a general description of certain types of insurance and services available to qualified customers. Any description of policy provisions is meant to give a broad overview of coverages and does not revise or amend a policy. Refer to the policy coverage form for a complete representation of the scope of coverage, terms, conditions, exclusions and more. The policy is the contract that specifically and fully describes your coverage. Some products may not be available in all states and may only be offered on a non-admitted basis. Product availability is subject to change.

Builders Risk Insurance Checklist

Your construction clients demand the most comprehensive coverage. Ensure your builders, contractor and owners have the best course of construction insurance coverage available.

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