Coverage for insureds with construction exposures beyond thelimited parameters of a standard commercial property form isaccomplished through the use of the simplified language buildersrisk form and endorsements.

The policy may be used to cover the interest of the buildingowner, the contractor, or both, as their interests may appear.

Here are eight important facts about builders risk insurancethat contractors, building owners, agents and brokers shouldknow.

1. Builders risk coverage is written for aminimum one-year term to cover a new building or structure underconstruction or an existing structure undergoing additions,alterations or repairs.

2. The rules in the Insurance Services Office's(ISO) Commercial Lines Manual state that policy inceptionshould begin no later than the date that construction “starts abovethe level of the lowest basement floor” or, if there is nobasement, the date construction begins.

3. The rules permit pro ratacancellation when construction is completed, whether insurance onthe completed structure is rewritten in the same company orcompanies or not. If the policy is cancelled before the structureis completed, the general cancellation provisions found in thecommon policy conditions apply.

4. Builders risk coverage can be written onexposures during construction that may not be eligible for certaincoverages when occupied. The rationale is that buildings eligiblefor builders risk coverage are commonly unoccupied; therefore,eligibility criteria that depend on occupancy or use don't applyduring the course of construction. Examples of such exposuresinclude boarding or rooming houses (with a maximum of four units),dwellings and farm properties.

5. ISO's Builders Risk Coverage Form, CP 00 20,is the basic avenue to builders risk coverage in the simplifiedlanguage commercial property program. The amount of coverage isbased on the value of the building upon completion (including thevalue of permanent fixtures and decorations). Insurance on thatvalue is provided from the outset of construction until coverageceases.

6. Covered property (for which a limit ofinsurance must be shown in the declarations) includes the buildingor structure while in the course of construction and extends tofoundations and certain items of property intended to become apermanent part of the building while located in, on or within 100feet of the described premises.

7. Insurers consider builders risk coverage tocease when the insured occupies the structure because builders riskrates don't contemplate the increased exposures of premises thatare occupied.

8. ISO also provides another Builders RiskCoverage Form, IH 00 70 12 13, which is designed to provide broadcoverage for the property that building contractors need to insure:building materials and supplies, fixtures, machinery and equipmentto service the building.

Editor's note: This information is excerpted from theFC&S Online article, “Builders RiskInsurance.”