Optional coverages. Most builders risk policies allow for a number of endorsements, which will affect the premiums as well. The good news is that agents can tailor coverages to meet their clients' specific needs. Here are a few to explore:

Soft costs. If the builders risk policy already insures against property losses known as "hard costs," the insured also may want to add "soft-cost" coverage. Often, these come into play if the project is delayed. To name a few, soft costs include advertising and promotional expenses, real estate and property assessments, insurance premiums, interest on construction loans, commissions, fees and legal expenses.
Loss of business and rental income. For commercial projects that will be rented, leased or used to generate income, a business income endorsement is a key consideration. It covers loss of income and associated expenses if there has been a delay in putting the building to its intended use.
Changes in project value. Coverage can be added to increase the limits in the policy to respond to contract change orders, which often increase the project's total completed value. Because agents are not normally contacted immediately when change orders are implemented, this endorsement can provide coverage up to a percentage (10%, 20% or 30%) of the project's value.
Flood and earthquake. These two coverages usually can be added to your policy or purchased separately.
Debris removal. Covers the cost of clearing and disposing of debris from a covered loss. You should check to see if the limits can be increased and if the policy includes demolition if the structure must be torn down. The construction materials' weight and the number of stories can increase the debris removal limits required for the project.
Pollutant cleanup. Covers the cost of cleanup and removal of pollutants on the job site. Again, it must be tied to a covered loss.
Law and ordinance. Coverage for the cost of complying with a new law or ordinance during construction, including the cost of delays due to compliance with a new law.
Equipment testing. Covers losses stemming from the testing of electrical, plumbing and mechanical systems. There are two types of testing: cold testing for the building's systems equipment and hot testing for high-pressure vessels, such as boilers, manufacturing equipment, etc.
Trees, shrubs, sod and plants. Coverage for landscaping on the property that is damaged as a result of a covered claim.
Property of others. An extension to cover supplies and equipment belonging to others who are working on the job but aren't named as an insured in the policy

Help your clients by staying informed

By staying up to date about the market and knowing how risk, limits and endorsements impact builders risk premiums, you'll be in a better position to advise your clients and secure the best policy for their needs.

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Black box opened: What factors influence builders risk coverage premiums?

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