Builder’s Risk Insurance: Who Needs It and Why?

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What do a nearly completed state-of-the-art resort, your neighbor’s extensive residential renovation, and your city’s new mall construction have in common? Before a single nail is hammered, all these projects were likely protected by builders risk insurance. That means those who are fiscally responsible for these projects are likely not losing sleep over perceived risks.

Builder's Risk Insurance

That peace of mind is more than a luxury – it’s a necessity. Many elements can impact the successful completion of a structure. Consider natural disasters like a fire that can incinerate a structural shell. Whether it’s 99% complete or barely visible, fire knows no boundaries. A hailstorm can damage building materials beyond repair. Earthquakes may unmoor an entire foundation. Builders risk insurance protects subcontractors, lenders or project owners’ investment from the drastic financial implications of such losses.

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The Difference between a Claims-Made Policy and Occurrence Policy

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There are two types of Property & Casualty insurance policies: Claims-Made Policy and Occurrence Policy.  It is important to understand the basics of each as the coverage type determines:

  • Whether or not your policy will respond to a claim
  • What your company’s responsibilities will be in the event of a claim
  • How much your premiums will cost, both now and in future renewal periods

Occurence versus claims made policy

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Flood Reform & Your Business

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Flood Reform & Your BusinessIn 2012, the U.S. Congress passed the Biggert-Waters Flood Insurance Reform Act. This requires a number of changes to the National Flood Insurance Program (NFIP). These law changes are mainly the result of rising costs and consequences of flooding over the past few years.

Some of these changes have already been put in place and others will be implemented in the coming months.  Key provisions of the legislation will require the NFIP to raise rates to reflect true flood risk, make the program more financially stable, and change how Flood Insurance Rate Map (FIRM) updates impact policyholders. The changes will mean premium rate increases for policyholders over time and they must be adhered to by all insurance companies who write flood insurance.

Effective October 1, 2013, the NFIP (National Flood Insurance Program) will no longer allow renewals for Pre-FIRM (built prior to 1975) business property in a Special Flood Hazard Area (this includes all A & V Zone properties) to continue receiving subsidized premium rates.  Business property flood renewals will experience a premium rate increase of 25% annually until their premium reflects true risk or until the owners submit a new elevation certificate.

New Business Property purchases that are Pre-FIRM and in Special Flood Hazard Areas will no longer be able to assume the seller’s flood policy and will be required to obtain an elevation certificate and pay the full actuarial rates.  Please note: allowing a flood policy to lapse, even if it’s the fault of your Mortgagee, can trigger rate changes and require you to obtain an Elevation Certificate to secure flood coverage.

Business Property is defined as any non-residential building that produces income, or a building designed for use as office or retail space, or for wholesale, hospitality, or similar uses.

General rate increases for all flood policy holders prior to the Biggert – Waters Act was a maximum of 10% per year.  With the passage of this Act, the maximum annual increase will be 20%. Additionally, Federal Rate Fee is increasing from $40 to $44.

If you don’t have an elevation certificate for your building, you will need to hire a surveyor to come to your property to complete the certificate. Also, effective October 1, 2013, a 5% Reserve Fund will be added to all flood policies except Preferred Risk Policies. Contact your WWW representative for a lists of surveyors in the area.

Sometime in 2014

This section of the bill requires an adjustment to the rating for all policies when their community adopts a new Flood Insurance Rate Map.  This will be phased in over the five years following the effective date of the map change or revision.

It is important to note that actions such as buying a property, allowing a policy to lapse (even if it’s the fault of your Mortgagee), or purchasing a new policy can trigger rate changes and will require you to obtain an Elevation Certificate to secure flood coverage.  We can advise how these changes might affect your flood coverage and what options you might have to lower your premium.


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