Author, Kevin Howard, Account Executive, Rancho Mesa Insurance Services, Inc.
Builder’s risk policies protect construction materials while they are being stored on a jobsite or have been installed during the course of a project, prior to the completion of the work. These policies are often required by the project owners or developers and provide protection from day one up until the last speck of paint is dry when the project is completed. They are considered the glue of a general contractor’s insurance program because they can provide critical protection if there is an insurance loss that otherwise could derail an entire project.
There are two methods of purchasing builder’s risk policies.
Purchasing Individual Builder’s Risk Policies
Imagine, as a general contractor, you are eager to bid a project. You identify the need for a builder’s risk policy while reading through the prequalification documents. You then need to take steps in order to secure this policy or to make sure that the proper pricing is included in your bid. Even with a faster than average timeline, the process can take days for the actual policy to be underwritten, quoted, communicated, agreed upon, bound and then certificates issued. Add the variable of needing several policies per year and/or bidding Job Order Contracts (JOC) through local municipalities, and the workload involved can be significant.
The process of interacting with your insurance broker in order to secure a builder’s risk policy that satisfies the needs of each project, and also the vendors that require the policy, can be time consuming and involves multiple steps.
Builder’s Risk Reporter Form Policy
Another approach, often overlooked, would be to secure a “builders risk reporter form” policy that offers:
Annual blanket basis
A “pay as reported” basis
The annual blanket basis would provide coverage for any size of project you would perform, annually, and that can be written on a blanket basis for projects that have not even been open for bid. A lot of time can be saved for companies accustomed to procuring one builder’s risk policy at a time.
A “pay as reported” basis builder’s risk reporter form allows policies to be purchased as they are reported to the carrier, which is ideal for any entity who needs multiple policies or that have multiple projects going on at once. Reporter forms can be set up on monthly, quarterly or on an annual reporting basis.
Items Needed to Generate a Builder’s Risk Reporting Policy Proposal
In order setup a Builder’s Risk Reporter form, you will need the following:
A list of past projects with project name, size, type and length included (i.e. the last 10 projects is the minimum, but more info can create a more favorable response from underwriting),
An executed and signed supplemental application, and
A favorable loss history.
A builder’s risk reporter form can save a ton of time and energy. And as we know, time is the only resource we cannot gain back.
If you have questions about setting up a builder’s risk policy, contact me at (619) 438-6874 khoward@ranchomesa.com.