When Does My Builder’s Risk Insurance End?

When Does My Builder’s Risk Insurance End?

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Builder’s risk insurance is not like other types of insurance. As such, it’s end date isn’t quite as clear.

If you’ve purchased an insurance policy in the past, then you know that most policies have a clear beginning and end date. Sometimes these are called effective and expirations dates. However, Builder’s Risk is different as it doesn’t always have this. Builder’s Risk coverage is placed during the course of construction. It’s meant to cover the building’s worth based on the portion of the project. As such, how much the project is worth according to the policy will increase as time goes on. Due to the unique nature of this insurance type, there are a few ways outside of the effective dates that this insurance can come to an end.

 The Purchaser Closes the Deal

In general, the builder is responsible for insurance during the construction project. Once the owner of the project, sometimes called the purchaser, takes over the project, then the insurance is invalid. It’s at this point that the project becomes the new owner’s responsibility no matter how complete the project may be.

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Insurable Interest Changes

Insurable interest is similar to the first example in the ownership category. If any insurable interest changes over the course of construction, then the insurance must change as well. Examples of this could include debtors on the property, such as a bank.  If the bank leaves, then the new bank needs to be placed on the insurance coverage.

The Project No Longer Has Intent to Complete

If you as the builder walk away from the project and do not intend to complete it, then the insurance policy is invalid. It doesn’t matter why you walked. The insurance company will not cover a build that’s not being finished. Abandoned buildings are a danger to insure due to their risk of vandalism and arson. As such, insurance companies try to avoid covering them. If the owner of the building wants the place to remain insured, they will often have to look for a new type of coverage.

30 Days Post Project Completion

If the owner of the building is also the builder, then the policy might not lapse as the first example suggests. However, once an occupancy permit has been granted, a builder’s risk policy won’t do anything to protect the building. In these cases, this coverage is cancelled, and you will need to look for insurance that will cover the specific needs of the building as it is functioning.

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The Property Is Being Used Properly

Very similar to the above example, once the project is done and isn’t being actively worked on, the insurance will no longer cover what happens on-site. Property insurance is often changed to as it is cheaper and covers what’s actively happening on the site once it’s been opened for business whether it’s a factory, park, or housing complex.

If any of the above situations happen on-site before the effective end date of the Builder’s Risk policy, then that insurance will cease to be valid. There are always other ways to cover the property depending on the needs of the site owner or builder. If the site is still under construction, then other types of insurance can cover the changed situation.

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