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Vehicle and Deer Collisions – Will Insurance Cover It?

Posted on Tue, Nov 12, 2013

Each year in the U. S., there' are approximately 1.5 million deer/vehicle collisions. This leads to about $4 billion in vehicle damage costs annually, with the average cost per claim averaging $3,305 during the last reporting period. The Insurance Institute for Highway Safety (IIHS) reports that this accounts for about 200 human fatalities per year.

Most car-deer accidents occur between the months of October and December, which also coincides with the deer's mating season. More accidents typically occur during the night, or anytime between dusk and dawn since deer are nocturnal animals and spend most of their time foraging at night.

If I Hit a Deer, Am I Covered?

The "deer caught in the headlights" analogy stems from the fact that, when temporarily blinded by oncoming motorists, many deer are likely to freeze in place. Since deer are social creatures and usually travel in groups, seeing one on or near the roadway usually means there are others nearby.

If you hit a deer, the claim will usually be paid by the comprehensive coverage of your car insurance policy. Even though the accident with the deer wasn’t your fault, you still will have to pay your comprehensive deductible amount.

If, however, you swerve to avoid contact with the deer and end up running into another vehicle or object (such as a tree or guardrail), the collision portion of your policy will apply. 

Swerving isn't a good idea. More injuries and fatalities are experienced from swerving and hitting a solid object than by just slowing and letting your car collide with the deer.

Do I need to file a police report?

In general, car insurance companies don't require you to fill out a police report to file a comprehensive claim for hitting a deer, but it’s advisable to contact authorities anyway.

Having a police report to back up your claim will help you be able file this claim under your comprehensive coverage. If the claims adjuster can't validate your claim that you hit a deer, the claim may end up under your collision coverage instead.

Even if your insurance provider doesn’t require a police report, your state may require a police or crash report for accidents where there is any injury, or property damage above a certain amount.

Will my car insurance premium increase?

Comprehensive claims, such as one for hitting a deer, don’t typically increase your car insurance rates. However, with many companies, if you file a certain number of claims within a specified period your rates can go up. So, if you already have had a few auto insurance claims in the past few years with your car insurance company, then this one could push your premiums higher due to the total amount of claims you’ve made.

Tactics to Avoid a Deer vs. Car Confrontation

Knowledge is power and knowing what to do to avoid hitting a deer can help keep both you and the wildlife safe from harm. Here are some important tips:

  • Follow the signs – if you see a deer-crossing sign placed on the side of the road understand that it's there for a reason. These are placed in areas where there are known deer habitat or waterways these animals frequent. Be extra vigilant, slow down (recommended no more than 55 MPH) and drive defensively, expecting a possible encounter.
  • Scan your surroundings – keep your eyes on the road, but scan left and right looking for the telltale signs of a deer's eyes, which shine bright green when reflecting your car's headlights. Use your high beams, if possible, and involve your vehicle's passengers in looking for possible trouble. If you frequently drive in areas where deer may be present, consider upgrading your lights with a good set of additional driving lamps.
  • Note the time of day – deer are most active around dusk and at sunrise, which are the exact times when seeing them is most difficult because of the lighting conditions. Realize this, slow down and keep your eyes alert for potential deer sightings.
  • Maintain your vehicle – having well-maintained tires and brakes that will allow you to stop in the shortest distance possible can prevent some collisions or lessen the impact of others. If a deer jumps out in front of you and hitting him seems unavoidable, slow the car as much as possible and try to make the contact a glancing blow rather than a head-on collision. As mentioned earlier, don't suddenly swerve to try to avoid contact as this will typically result in a more dangerous situation.

When driving in deer territory, it's your responsibility to take extra care because they're not going to. Make sure your vehicle is properly protected with comprehensive coverage on a good insurance policy and drive defensively at all times.

 

 

Take Precautions During Thunderstorms

Posted on Tue, Jun 29, 2010

From:  FEMA

To prepare for a thunderstorm, you should do the following:

  • Remove dead or rotting trees and branches that could fall and cause injury or damage during a severe thunderstorm.
  • "If thunder roars, go indoors" because no place outside is safe when lightning is in the area. We want everyone to stay indoors until 30 minutes have passed after they hear the last clap of thunder.

Summary of Lightning Safety Tips for Inside the Home

  • Avoid contact with corded phones
  • Avoid contact with electrical equipment or cords. If you plan to unplug any electronic equipment, do so well before the storm arrives.
  • Avoid contact with plumbing. Do not wash your hands, do not take a shower, do not wash dishes, and do not do laundry.
  • Stay away from windows and doors, and stay off porches.
  • Do not lie on concrete floors and do not lean against concrete walls.

The following are guidelines for what you should do if a thunderstorm is likely in your area:

  • Postpone outdoor activities.
  • Get inside a home, building, or hard top automobile (not a convertible). Although you may be injured if lightning strikes your car, you are much safer inside a vehicle than outside.
  • Remember, rubber-soled shoes and rubber tires provide NO protection from lightning. However, the steel frame of a hard-topped vehicle provides increased protection if you are not touching metal.
  • Secure outdoor objects that could blow away or cause damage.
  • Shutter windows and secure outside doors. If shutters are not available, close window blinds, shades, or curtains.
  • Avoid showering or bathing. Plumbing and bathroom fixtures can conduct electricity.
  • Use a corded telephone only for emergencies. Cordless and cellular telephones are safe to use.
  • Unplug appliances and other electrical items such as computers and turn off air conditioners. Power surges from lightning can cause serious damage.
  • Use your battery-operated NOAA Weather Radio for updates from local officials.

Avoid the following:

  • Natural lightning rods such as a tall, isolated tree in an open area.
  • Hilltops, open fields, the beach, or a boat on the water.
  • Isolated sheds or other small structures in open areas.
  • Anything metal—tractors, farm equipment, motorcycles, golf carts, golf clubs, and bicycles.

 

 

Taking The Mystery Out of “Other Structures” Property Coverage

Posted on Wed, Jan 29, 2014

While reviewing your homeowner’s insurance policy, you notice a particular coverage called “Other Structures.”   Several questions pop into your head. What is it?  What’s covered under this feature?  Am I paying extra for this?  "Other Structures" is defined by the insurance industry as structures which are on the property that do not share a foundation with the home. 

It is safe to say that almost everyone needs Other Structures coverage. It’s also important to make sure you have enough coverage and to know what is covered and what is not covered. "Other Structures" can include:

  • Detached garages
  • Storage sheds
  • Barns
  • Guest houses
  • Pool houses
  • Gazebos
  • Fences
  • Driveways
  • Sidewalks
  • Patios
  • Swimming pools
  • Retaining walls

Most homeowners insurance companies provide this coverage, which is 10 percent of your dwelling coverage, at no charge. This automatic percentage is both a good and bad thing. The good part is that the policy recognizes that almost everyone needs at least some coverage for other structures, and therefore provides it to you automatically at no cost. The bad part is, because it is automatically provided, many people do not think about whether or not the coverage being provided is enough.

For example, if your home is insured for $100,000 and your policy is providing 10 percent of this coverage for other structures that gives you $10,000 automatically. This may sound like a lot of coverage to replace a garden shed; but it may not be enough to replace a swimming pool, a gazebo, or an extensive retaining wall structure. 

To be covered under the standard homeowner’s policy the structures must be used for personal use, not business. However, depending on who owns the business and what the business is, you may be able to endorse the coverage onto the homeowner policy. Otherwise, structures used for business need to be covered under a business insurance policy. Your insurance agent should be able to help you understand which structures are, or are not, covered. It’s not uncommon for there to be confusion in certain situations:

  • Storage sheds which are used to store the home's garden equipment would be covered. However, a storage shed used to store garden equipment for a landscaping business would not be covered under the homeowner's basic homeowner’s insurance policy.  
  • Barns to store supplies for animals would be covered; however, they would not be covered if the animals were kept for profit.  For example, horse trainers would need a business policy to cover them properly.

Additional coverage for Other Structures can be added for an additional charge. The cost to increase the coverage is usually $4 per $1,000 of coverage. It is good to note that while detached buildings can be covered at replacement cost (which will pay for the repair or replacement of the building without a deduction for depreciation), other structures which are not buildings are covered at Actual Cash Value (which depreciates the amount the carrier will pay out based upon the age and condition of the structure prior to the loss). These items would include fencing, driveways, and other man-made structures that are not buildings.  Also, detached buildings have to be insured to 80% of the replacement cost as of the date of loss to avoid a coinsurance penalty.

So the next time you are puttering around your yard, take stock of what you have on the land and contact your insurance agent to discuss these structures and whether or not you should increase your Other Structures coverage to be properly protected.

 

 

Are Frozen Pipes Covered By Homeowners Insurance?

Posted on Mon, Dec 10, 2012

Water damage caused by frozen pipes can be one of the most damaging problems a homeowner or business owner can face.  When a pipe bursts, damage can happen very quickly and will continue to worsen until the problem is isolated.  Damage from burst frozen pipes can allow water to flow into the ceilings and walls of a structure.  Unfortunately, it might not be detected as quickly as other water problems and therefore, the damage has a chance to spread. 

The good news is that most home insurance companies will cover damage resulting from a frozen pipe provided you can prove that you took measures to prevent the pipe from freezing. For example, many policies say that coverage applies if you can show that you either 1) shut off the water supply and drained your system, or 2) maintained heat to your home during a period when the house is unoccupied. 

If a small crack in a water pipe caused slow leakage, the resulting damage may not be covered.  This could be considered a maintenance issue instead.   Water losses that occur due to lack of maintenance are not covered on a standard homeowner’s policy.

Coverage for burst pipes includes:

  • The cost to access the broken pipe such as tearing out a wall.
  • Necessary repairs or replacement for any damaged property such as drying out flooded carpets or replacing destroyed furniture or electronics.
  • The cost to repair and restore the wall once the pipe has been fixed.
  • If the damage is so extensive that you can’t stay in the home, your insurance company generally will pay for additional living expenses.

Note:  Normally, the actual cost to repair the section of broken or frozen pipe is not covered, but this is generally a small part of the total cost of the claim.

Our best advice is to avoid a loss with good maintenance. 

If you have a water loss, contact a water mitigation company such as Servicemaster as soon as possible.  These experts have the knowledge and equipment to dry out your home before mold and mildew set in.

 

 

Furnace Puff Backs - Cause and Prevention

Posted on Fri, Nov 01, 2013

Furnace “puff backs” occur most often in winter and can create a mess and smell that can permeate your entire home. A puff back is a misfiring in the furnace that can send soot throughout your home, covering drapes, bedding, furniture, cabinets, walls, and everything in between.  It requires expensive cleaning and restoration in addition to repairs on your heating system.  The consequences are severe, but you can work to prevent it.

How Does a Puff Back Occur?

A puff back can happen when an oil burner doesn't ignite immediately and oil fumes are allowed to build up before ignition, resulting in an explosion similar to the backfiring of a car.  Buildup of debris can also create an excessive explosion at ignition.  In either case, the explosion can shoot soot and debris through the furnace or boiler's exhaust system and into your home.  If you have a forced air system (a hot air system as opposed to a hydronic, or hot water, system) the problem will likely be worse as the heating ducts can spread soot into every corner of your home, with the same efficiency that they spread heat.  A puff back can be a chronic problem, with each ignition sending forth a small amount of soot that slowly accumulates on heating vents, ceilings, carpets or baseboards, or it can be a single sudden event that sends a large amount of soot through the heating system.

This discharge of soot points to an underlying problem with the heating system which will need to be repaired.  If you’re lucky, the faulty piece will only be an inexpensive valve or filter and not a signal that the oil burner needs to be replaced.

What Should You Do?

It is quite amazing how much the soot can cover - it goes everywhere.  It can even force you out of your home in some cases.  This soot is not just a powder-like substance, but is black and sticky and will include a mixture of oil that is difficult to clean.  But this dirty residue needs to be cleaned as soon as possible.  Oil based soot is extremely difficult to remove.  In addition to the soot, a puff back causes a foul odor to permeate your home.  So what should you do?

  • Assess the situation and the amount of damage that was done
  • Wash all affected clothing and fabrics in the house - some may require professional dry cleaning
  • Throw away all exposed food
  • Call a repairman to fix the malfunctioning oil furnace
  • Call a cleaning service to take care of the soot and chemicals

And that's where you need a puff back specialist to thoroughly clean and deodorize all affected items and surfaces.  

How to Prevent Puff Backs

There are a few steps you can take to prevent puff backs:

  • Keep your oil heating system free of dust
  • Inspect and service your heating system yearly
  • If you hear noises or see soot near your furnace, call your heating company

Your homeowners policy will usually cover damage to your home and contents caused by a puff back. However, the cost to repair the furnace would most likely not be covered as it is most likely a maintenance issue. If a puff back occurs, we recommend that you do not attempt to clean it yourself. Using standard cleaning products could cause further damage and may not get rid of the oil residue and odors. The cost of hiring a professional cleaning company and other related expenses would be covered as part of the claim and are subject to the policy deductible. If you have any questions on puff backs or how your policy will respond, call us at 800-922-8381. Enjoy your warm house this winter knowing you are properly covered.

 

 

What Does Being At-Fault In An Accident Mean?

Posted on Tue, Aug 14, 2012

Car accidents can be nerve-wracking experiences even when no one is injured.  They can be even more stressful if you’re the one that caused it.  If you get into a car accident and you are found to be the one at fault, there are usually repercussions for your insurance. Here is some general information about what it means to be at-fault and how the process is handled.

What does it mean to be at-fault?

Under Massachusetts law, you are considered to be at-fault for an accident if your driving behavior at the time of the accident was more than 50% of the reason for the accident.

Will my auto insurance premium go up if I am at-fault in an accident?

In many instances your premium will go up if you are found to be at-fault in an accident. However, state law prohibits insurers from increasing your premium based on at-fault accidents or traffic violations that occurred more than five years prior to the effective date of your policy.

The effect on your premium when you are at-fault in an accident will be based on the rules and rating factors your insurance company has filed with the Division of Insurance. Most insurance companies assign a fixed number of points for each type of at-fault accident or traffic violation, and the total point value is used to determine a percentage increase to the premium for the policy. At-fault accidents may affect future premiums for 3-5 years.

Who determines who is at-fault in an accident?

Ultimately, the determination of who is at-fault in a motor vehicle accident rests with the Massachusetts courts. However, because motor vehicle accidents are very common, laws and regulations have been established that permit insurers to presume that motor vehicle operators are at-fault in certain pre-defined accident situations. For example, the law states that an operator shall be presumed to be more than 50% at fault when operating a vehicle which is in a collision with another vehicle which is moving in the opposite direction on the proper side of the roadway or center line.

A complete list of accidents in which the law allows insurers to presume that an operator was at fault is contained in regulation 211 CMR 74.00.

If you are at-fault and the insurer pays more than $500 in claims on your behalf, state law requires the insurer to report such claims to the Massachusetts Merit Rating Board.

Can I appeal an insurer’s determination that I am at-fault in an accident?

Yes. If you believe that you are not more than 50% at-fault for an accident, you may appeal the insurer’s at-fault determination to the Board of Appeal at the Division of Insurance. You must request this appeal within thirty days of the date shown on the at-fault notice.

How do I appeal an insurer’s determination that I am at-fault in an accident?

The notice informing you that an insurer has determined you to be at-fault has two sides. The process for applying for an appeal is described on the bottom of the front side of the notice. An appeal form is on the back side of the notice. You must complete the form and return it to the Board of Appeal at the Division of Insurance within 30 days of the notice.

Where and when will my hearing be scheduled?

The Board of Appeal will mail you a Notice of Hearing when your hearing date has been scheduled. Appeal hearings are scheduled in Boston as well as a number of other locations. Carefully note the location of your hearing listed on the Notice. Directions are included at the bottom of the Hearing Notice.

What will the hearing entail?

The hearing is informal and public, and typically lasts 20 to 30 minutes. The Hearing Officer will make an audio tape recording of the hearing. You or your representative and the insurance company representative will each be given an opportunity to present all pertinent information. You may also bring a witness or a witness statement to the hearing. The Hearing Officer may ask you or the representative questions to clarify the information presented or the circumstances of the accident.

When will I learn the outcome of my hearing?

At the conclusion of the hearing, the Hearing Officer will take your appeal under advisement. The facts and circumstances presented will be reviewed in accordance with the governing laws and regulations.

Under the law, your testimony and the evidence/information you present must overcome the presumption of fault to have the at-fault determination removed from your driving record.

A Memorandum of Finding and Order, the Board's decision, will be mailed to you within 2-4 weeks.

If the decision is marked VACATE, the Board has found that you were not more than 50% at- fault for the accident. The at-fault determination on your driving record as a result of the accident will be removed.

If the decision is marked UPHELD, the Board has found that you were more than 50% at-fault for the accident. The at-fault determination will remain on your driving record.

 

 

How the Surcharge Point System Affects Your Auto Insurance

Posted on Mon, Feb 27, 2012

Massachusetts has a Safe Driver Insurance Plan (SDIP), a program mandated by state law which allows insurance companies to issue surcharges or discounts on insurance premiums based on driving records.  Essentially, SDIP rewards good drivers by keeping their rates low and punishes high-risk drivers by making them pay a greater share of all insurance costs.

Your driving record affects your auto insurance rates

The Safe Driver Insurance Program is based on a point system called "surchargeable points".  If you have at-fault accidents or commit traffic violations, your driving record will accumulate surcharge points depending on the nature of the incident. 

  • Traffic violations - Every time you are convicted of a moving violation?like a speeding ticket, for example?you get a surchargeable event on your record and a resulting charge on your insurance bill. The same holds true for criminal motor vehicle violations, like driving while under the influence of alcohol.
  • Accidents - You will also get a surchargeable event on your record and a surcharge on your bill for any motor vehicle accident in which you were ruled more than 50% at-fault or for which your insurance company pays out more than $500 in claims for damage to property or bodily injury.

On the other hand, a clean driving record can reduce your auto insurance costs, lowering premiums in some cases by up to 17 percent. 

The Massachusetts schedule of surcharge points is as follows:

  • Major traffic violation (such as DUI): 5
  • Major at-fault accident (such as a claim over $2,000): 4
  • Minor at-fault accident (claim of $500 to $2,000): 3
  • Minor traffic violation (such as speeding): 2

You get a free pass on the first non-criminal minor traffic violation, which will not be subject to a surcharge. After that, the points start to rack up.

How long do surcharge points stay on my record?

Even if your driving record contains surcharge points, the system has built-in incentives for improving your driving. If you have no more than 3 surchargeable incidents over the past 5 years, 1 point will be removed for each violation, for every 3 years of incident free driving.

There is no other way to reduce points and surcharges from your record, unless you choose to appeal the finding or challenge it in court.

 

 

What damage from winter storms is covered under insurance?

Posted on Wed, Jan 05, 2011

Along with winter comes freezing temperatures, ice, snow and wind which can cause severe damage to homes and property, especially when they take you by surprise.  Winter storms are the third-largest cause of catastrophe losses, behind only hurricanes and tornadoes. 

Standard homeowners policies provide coverage for damage caused by wind, snow, severe cold and freezing rain.  Car accidents caused by slippery road conditions are also covered under standard auto insurance policies.

The following information on insurance coverage for winter storms is offered by the Insurance Information Institute:

Auto Policies

  • Car crashes between two or more drivers caused by snowy and slippery roads are covered by liability insurance. A car that crashes into an object would generally be covered under the optional collision portion of an auto policy.
  • Physical damage to a car caused by heavy wind, flooding or fallen ice or tree limbs is covered under the optional comprehensive portion of an auto policy.

Homeowners Insurance Policies

  • Wind-related damage to a house, its roof, its contents and other insured structures on the property are covered under standard homeowners insurance policies. Wind-driven snow or freezing rain that gets into the home because it was damaged by wind is also covered.
  • Tree limbs that fall on a house or other insured structure on the property would be covered for both the damage the trees inflicts on the house and the cost of removing the tree, generally up to about $500. Ice or other objects that fall on the home are also covered.
  • Damage to the house and its contents caused by weight of snow or ice that creates a collapse is covered under standard homeowners insurance policies.
  • Freezing conditions such as burst pipes or ice dams, a condition where water is unable to drain properly through the gutters and seeps into a house causing damage to ceilings and walls, is covered. However, there is generally a requirement that the homeowner has taken reasonable steps to prevent these losses by keeping the house warm and properly maintaining the pipes and drains.
  • Melting snow that seeps into a home from the ground up would be covered by flood insurance, which is provided by the National Flood Insurance Program, and a few private insurers. Flood insurance is available to both homeowners and renters. Damage caused by flooding is not covered by standard homeowners or renters insurance policies.
  • Standard homeowners policies also include additional living expenses in the event that a home is severely damaged by an insured disaster. This would pay for reasonable expenses to live elsewhere while the home is being fixed.

If your property is damaged as a result of a winter storm, you should contact your insurance agent as soon as possible.  You’ll need to make them aware of the extent of the damage and then start to document your losses with lists, receipts and/or photographs.  Having a home inventory would be incredibly useful in this case.

 

 

Why Is The Cost to Rebuild A Home Higher Than New Construction?

Posted on Mon, Apr 02, 2012

Many consumers are astounded when they buy a home for $175,000 and their insurance agent wants to insure it for $300,000 or more.  The reason an agent would recommend the higher amount is because the cost to replace your home after damage from a fire, storm or some other tragedy is higher than the cost to buy another similar home on the market.  This assumes, of course, that you have replacement cost coverage on your homeowner policy.

Following are several reasons that explain why rebuilding costs could be 30-40% higher than new construction. 

  • Demolition and debris removal.  While new home construction normally begins on open site with perhaps some brush removal and grading, rebuilding begins with a partially or totally destroyed structure occupying the building site with trees, plantings, driveways, sidewalks and other structures that have to worked around. The site may have to be cleaned after a fire left it contaminated.
  • Top-down versus Bottom-up.  New construction begins at the foundation and builds upwards.  Repairing a house that is not destroyed often means removing the roof and rebuilding from the top down, a far more time-consuming and labor-intensive process.
  • Costs Vary by Location.  The demand for construction labor and associated fees in your community may vary greatly with those in another community. As an example, average rebuild prices for a mid-century ranch in suburban Ohio may be $75 to $90 a square foot, while the cost to rebuild a condo in Manhattan may be $300 a square foot.
  • Access to the Worksite.  When new homes are under construction, there is usually open area, allowing for easy access to the site. Materials can be driven directly up to any side of the structure as needed. When a house is being rebuilt among existing homes though, there is often landscaping, fences, and similar obstructions limiting access. Materials often have to be off-loaded further away and delivered by wheelbarrows or hand-carried to where they are needed. The impact on labor costs can be significant.
  • Construction costs rise after natural disasters.  Following a natural disaster affecting a wide area, the costs of building materials and contractor fees nearly always rise sharply in response to the sudden increase in demand. Even without deliberate profiteering, this would normally be true because when local supplies are quickly exhausted, materials have to be brought in on an emergency basis, often from mills or factories at great distance. This may require higher transportation costs. Whenever many homes have to be repaired or rebuilt at the same time, the cost for each will be higher than normal.
  • Special Features and Unusual Materials.  Older homes and homes that have been extensively remodeled often have customized features or include materials not commonly found in homes being built today. These features and materials can be expensive, if not impossible to duplicate. It’s often difficult to even find craftsmen that still do this type of work. 
  • Rebuilding to code.  Most older homes and even many newer homes, were built during times when building codes were less strict than they are today. If you are rebuilding or restoring your home, you may need to meet the newer and more demanding building codes. Even undamaged parts of the structure may have to be rewired or plumbed to meet current codes. Building code changes can add thousands of dollars to the cost of restoring a damaged home.
  • Economy of scale.  When contractors have many homes under construction at once, materials can be purchased in at a discount due to large quantities and work can be scheduled for the most efficient use of carpenters, plumbers, electricians, and other tradesmen.

Check with your agent every two to three years to request a new rebuilding cost estimate.  If you don’t have replacement cost coverage on your homeowners policy, you should speak with your insurance agent about getting it.  Not having replacement cost coverage could mean you end up with huge out of pocket expenses.

 

 

Builder’s Risk Coverage: Understanding the Policy Period

Posted on Thu, May 29, 2014

Construction projects, regardless of their size, can present complex insurance issues. Are you confused about your exposures and policy options? If so, it’s no surprise—there are no standard builder’s risk policy forms covering these types of risks. To help you limit your exposure, here are some helpful builder’s risk policy basics.

The Basics

Builder’s Risk coverage is a type of property insurance specifically designed to cover property during the course of construction, including renovation and repair.  Why do you need it? There are additional risks and responsibilities inherent in this type of work that a typical property policy is not designed to cover. For example, if someone steals contractors’ equipment from the job site or if construction materials are damaged, you could be liable for the loss if you do not have builder’s risk coverage.

Typically the coverage is purchased by either the property owner or contractor.

Regardless who purchases the coverage, all parties that have property involved in the project should be named in the policy. This may include the owner, contractor, subcontractors, the financial institution funding the project, and, in some cases, the architects and engineers. Once the project is completed and/or accepted by the owner, your regular property policy kicks in.

Since builder’s risk coverage only deals with the property, it does not include coverage for worksite injuries or design/construction defects. For any mishaps that occur on the job, you should rely on liability and workers’ compensation insurance policies for coverage.

Policy Period

When purchasing builder’s risk coverage, one of the issues often overlooked is the policy period – it may not be clear when the coverage begins and ends. As a result, keep the following in mind:

Commencement of Coverage: Builder’s Risk policies provide coverage for property in the course of construction, renovation or repair. But at what point does construction renovation or repair begin?

  • Typically, contracts require that insurance be provided for the duration of the contract period. This means that the policy inception date would be the date the contracts are signed.
  • The lender may also specify the inception date.
  • However, be sure to review insurance policy provisions to determine whether there are restrictions on when coverage begins. Policies may contain clauses that state coverage begins when construction commences or that the insurance company will pay for losses at the time you become legally responsible for the covered property, either on or after the effective date. Prior to any site preparation, demolition, or delivery of materials or equipment, review the policy to ensure there are no restrictions on coverage inception.

Coverage Expiration: Determining when coverage terminates can be equally problematic. Builder’s Risk policies can contain provisions that terminate coverage prior to policy expiration. The provisions typically state that coverage will end at the earliest of the following:

  • The policy expires or is cancelled;
  • The property is accepted by the purchaser;
  • Your interest in the property ceases;
  • You abandon the construction with no intention of completing it;
  • Unless specified otherwise in writing:
    • 90 days after construction is complete, or
    • 60 days after construction is complete and building described in the declaration is:
      • Occupied in whole or in part, or
      • Put to its intended use.

Problems and Solutions

Problems

  • There is no coverage under the policy if the building is occupied to any extent, for over 60 days, without written consent of the insurance company.
  • The policy only provides coverage for up to 90 days after the completion of construction.  In the case where the building is completed only two days before policy expiration, there are only two days of coverage available. There are 90 days of coverage available after completion only if there are at least 90 days remaining in the policy period.
  • Coverage issues can arise at the end of a project, after construction is complete and the structure is occupied, but a "punch list" and final completion work remains.

Solutions

  • Understand the insurance coverage obligations of the project documents and contracts to ensure the policy period, at a minimum, fulfills the requirements.
  • Understand the terms and conditions of the policy and what triggers the coverage to commence and cease.
  • When coverage ends make sure permanent coverage is in place so no gaps in coverage exist.

Careful planning is the foundation for a smooth construction project, which includes the right exposure coverages. Many businesses choose to transfer or accept risk through contracts, purchase orders and lease agreements. However, not all contracts or endorsements are created equal. An agent who understands your business can knowledgeably help you with builder’s risk policy language to meet your individual needs. Call us today at 800-922-8381 to learn more about contractual risk transfer and its place in your overall risk management program.

 

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Whitinsville, MA 01588
Main office: 508-692-9172
Toll free: 800-922-8381
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I was pleasantly surprised! I will recommend you to all my family and friends.

Laura Pietruszka
Gaudette was and has always been a great resource we are pleased to have. You folks are awesome!

A.J. Pucell