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What’s in your Builder’s Risk policy?
If anything sums up the old adage about something being “greater than the sum of its parts,” it would be a construction project. Before we discuss the advantages of a reporting policy, however, it’s important to understand what a builder’s risk policy insures.

During the course of construction (where the value of the project increases day after day), a builder’s risk policy covers damage to buildings, structures and other property that is a permanent part of same. The extent of coverage, however, can vary depending on the carrier. AXA XL’s Inland Marine team offers a builder’s risk policy that can insure:

  • Private and public works
  • Commercial, industrial and residential occupancies
  • New construction
  • Renovation, alteration or addition to existing buildings

Additionally, equipment breakdown, flood, earthquake and volcanic eruption are available when required. Finally, soft cost coverage can be crafted to address additional expenses such as:

  • Interest on money borrowed to finance the project
  • Realty taxes and ground rent
  • Additional advertising and promotional expenses necessarily incurred
  • Cost of additional commissions incurred upon renegotiating leases
  • Fees for additional architects, engineers and consultants
  • Continuing project administration expense
  • Continuing legal and accounting fees
For contractors with multiple projects [using similar materials], a Master Builders Risk reporting form can offer significant advantages over single policies.

Reporting for Duty
Many contractors buy standalone policies to cover individual projects. Furthermore, these policies might be insured by different carriers. The insured and broker’s objective is to obtain the best terms, price, and service for that particular job. This seems straight forward enough, but it may not always be the best choice.

For contractors with multiple projects — built using the same construction material for similar occupancies (for example reinforced concrete, glass and steel office buildings) — a Master Builders Risk reporting form can offer significant advantages over single policies.

  • Flexible. With a reporting form policy, the contractor adds and removes projects as they begin and end, respectively.
  • Immediate Coverage. Projects added within the terms of the policy are covered right away; no need to chase after the broker to get a quote or issue a certificate of insurance.
  • Locked in Rates. As the contractor add a project to the policy, they can do so knowing the insurance costs up front, which helps manage budgets and offer bids.
  • Accounting Transparency. Because monthly premium charges are known up front, it is easier for owners, investors and other parties to understand the cash position of the project.
  • Ease of Doing Business. Coverage, risk engineering or claim issues can be handled more easily with a single point of service.
    Better Cash Management. Because the contractor only pays for active projects, cash flow is improved.

Other Things to Consider
We’re not calling these disadvantages for a reason. They’re simply points a contractor should look at closely when deciding to buy a reporting policy.

  • Deposits. Typically, a refundable escrow deposit is required at policy inception.
  • Risk Exposures. We find that contractors with fairly homogeneous exposures are best suited for using a reporting form policy.
  • Familiarity. Reporting policies take getting used to, particularly with the deadline-oriented record keeping required.
  • Deadlines. Contractors must report new starts by a specific day each month, with correct information provided for each start. Premium payment must also be issued on time to ensure there are no lapses in coverage. 

The bottom line is a reporting form policy can save time and money for the right kind of contractor and construction project.

About the Authors: Alexander McGinley is the Head of Underwriting Operations, Product and Strategy for AXA XL’s North America Marine team. Mike Perrotti is the Inland Marine Practice Leader for AXA XL’s North America Marine team. AXA XL’s inland marine underwriting and claims teams can work with you and your broker to determine if it’s the right policy arrangement for your project portfolio.

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