Builder's Risk Insurance: Specialized Coverage for Construction Projects

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By no means should anyone be shown as a loss payee, not even a financial institution. When it comes to covering a financial institution’s insurable interest, the proper language is mortgagee, on a separate mortgagee provision; or designation of mortgagee, on a lender’s loss payee endorsement.

Most builder’s risk policies are executed on a completed value form. The exception is a reporting form when a contractor is involved in more than one project at a time. The determination of which form will be used is usually an option left to the underwriter.

Completed Value Form

Under the completed value form the insurance limit is set at the expected completed value of the project, sometimes with a coinsurance clause. If, as is frequently the case the actual cost of the project exceeds the initial estimate, the limit should be increased as soon as this is discovered.

Caremust be takenwhen determining the insurance limit to be applied. Common errors include:

Most builder’s risk policies are executed on a completed value form. “ ”

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