The average insurance agency is just not equipped to handle the special insurance needs of a home builder.
Here are nine quick tips that will show you how you can save big on your home builder’s insurance and make sure you get the best coverage possible.
- Do business with a home builder insurance specialist Insurance is a huge industry. Anything you can have, do, own, manage or whatever — there’s insurance for it. And nobody can specialize in all of it. In fact, a professional insurance agent can only specialize in a few niches — and really understand them. If someone specializes in insuring homes, autos, retail stores, or subs, it doesn’t mean that they know anything about home builders insurance.
- Your agent must represent several insurance companies that aggressively insure home builders. Most insurance companies don’t want to write the coverages for a home builder because they are considered “paper general contractors” that have no control over the activities of their subs.Within each state, there are only several insurance companies that aggressively seek to insure homebuilders.Your agent must represent more than one of these insurance companies to protect you against unfavorable changes in prices and coverages that can occur from year to year. All insurance companies go through up and down cycles and your agent must have more than one option to protect your interests.
- Only do business with insured subs.
- Know how to properly collect valid Certificates of Insurance from your insured subs.
- Know how to properly deduct from uninsured subs.
- Know the classification rules so you’ll know the true cost of doing business with uninsured subs. Not getting the right advice on how to deduct from uninsured subs, properly classify your workers, and how to make sure that your Certificates of Insurance are valid can cost you big money!
- If you have an experience modification on your Workers’ Compensation policy, make sure your agent verifies its accuracy. Remember, the experience modification is incorrect over 50 percent of the time and most of these mistakes are in the favor of the insurance company.You should ask your insurance agent to review your Workers’ Compensation losses nine months prior to your renewal. If a particular loss has had a large reserve established in anticipation of a future payout, an investigation of such loss should be made to make sure that the reserve is valid.If the reserve does not appear to be valid, a request should be made to the claims adjuster to lower or eliminate the reserve at that time. The deadline for lowering or eliminating a reserve is six months prior to your renewal (assuming that your Anniversary Rating Date occurs on your renewal). If the six month deadline is not met, your next years Experience Modification will be higher than necessary.
- You and your agent should check your audit for accuracy. Untold savings will result from an insurance agent who reviews your audit for mistakes and verifies the accuracy of your experience modification.
- Builders’ Risk: Choose the right coverage amount and terms. When establishing the amount of coverage for a start, use the estimated completed value including profit and overhead less the cost of the lot, real estate sales commissions, landscaping, impact fees, architect fees, etc.Any expense item that can’t be damaged or lost does not need to be insured.
Most builders’ risk monthly reporting form policies offer an option between a monthly rate or an annual rate. For example: the monthly rate may be .04 per $100 and the annual rate may be .25 per $100. Which one should you choose? It depends on how many months on average that it takes you from the start date to the sale date. In this example, the near breakeven point would be approximately six months since 6 mos. x .04 equals .24.
So the question becomes, does it take you more than six months on average from the start date to the sale date?If no, you would be better off with the monthly rate of .04. If yes, you should choose the annual rate of .25.