Single Shot

A Single Shot is a separate Builders Risk policy issued on each house being built. There is a minimum premium (usually $350) and there is no refund if the house is completed before the policy expires. The builder must provide all of the specifics on the house (street address, construction, square footage, etc.) before the policy can be issued.

This type of policy is usually issued for builders doing custom construction with high values, or builders doing three or fewer homes per year. This policy is not recommended for volume builders.

The disadvantages to the single shot are: builder could forget to call his agent to have the policy issued; more communication required between the builder and his agent (must supply information to agent each time in order to complete the application and secure coverage), no coverage if policy is not issued and rates are usually somewhat higher. This can be an administrative hassle for volume builders.

Monthly Reporting Form - Monthly Rate

The builder completes a report each month listing all of his existing inventory for the prior month. The builder applies the rate to the total inventory values and computes his monthly premium charge and sends his check to the insurance carrier along with the monthly report. Once a house is completed/sold it is no longer listed on the next monthly report.

The advantage to this type of policy is the rate is lower and the builder pays less if he is able to complete the house in under 5 months. He also doesn't have to contact his agent each time a new house is started. This type of policy works well for volume builders who turn over houses quickly.

The disadvantage is keeping up with the inventory each month and remembering to list each house in progress on the monthly report. Again, there is no coverage if the house is not reported each month.

Monthly Reporting Form - Annual Rate

The builder completes a report each month listing all new starts for the prior month. The builder applies the rate to the total value of all new starts and computes his monthly premium charge and sends his check to the insurance carrier along with the monthly report. The new starts are covered for 12 months, and don't need to be reported again unless construction isn't finished by the end of the 12 month term. This policy works well for builders who usually take more than six months to complete their houses.

The advantage to this policy is that the builder doesn't have to list his entire inventory each month; only new starts need to be reported. Also, the builder doesn't have to contact his agent each time he starts a new house.

The disadvantage is that monthly reports still have to be completed.

Blanket Annual Deposit

This is the easiest of all Builders Risk policies. The builder estimates the number of new starts anticipated for the coming 12 months and the average completed value. The insurance company applies the rate to the total estimated annual values. Most insurance carriers offering this type of policy offer a payment plan. Mid term (as well as annual) audits are usually conducted. If the builder starts more houses than originally anticipated, or fewer than anticipated, the difference is picked up during the audit.

This type of policy greatly reduces the administrative hassle of other types of policies, and also eliminates the risk of not remembering to report a new start and going without coverage.