can vary greatly between different insurance carriers and markets. As with any insurance policy you purchase, it is important to under- stand the coverages included and the exclusions of your policy. Having an in-depth conversation with an experienced insurance agent about the scope of your project and asking as many questions as needed is critical to selecting the most appro- priate insurance policy for your next investment property. •
COURSE OF CONSTRUCTION When performing more extensive work on an existing structure, such as adding additional square footage or moving load-bearing walls, a more robust policy may be needed. These policies are often referred to as course of construction policies and can include many optional bells and whistles. The basic coverages are the same as a builder’s risk endorsement, but often with higher limits of coverage and broader perils covered. There can be additional coverages that are included or are optional, such as materials in transit or at a tempo- rary location, backup of sewers and drains, ordinance and law coverage, and debris removal. Certain soft costs can also be added to the policy from project delays, including architect fees, interest on construc- tion loans, license or permit fees, and more.
GROUND-UP CONSTRUCTION
An insurance policy for ground-up construction is essentially a course of construction policy as outlined above, but with added underwriting guidelines and considerations. Again, selecting the most appropri- ate coverage amount is the first step. Remember selling price minus land value or ask your insurance agent. In ground-up policies, you will want to be more diligent in your selection of additional coverages, especially having the option for a change order endorsement. A change order endorsement can increase your cov- erage amount, often in increments of 10%, if the scope of the project exceeds your original valuation. This endorsement can provide peace of mind if costs go up or the project timeline gets extended. All the coverages, endorsements and exclusions touched upon above
Sam Brust leads business and product development for Ross Diversified Insurance Services. RDIS has been serving the investor community for
more than 35 years with insurance products ranging from single rehab properties to large portfolios of 500+ rental properties nationwide. Brust attended CSULB for business admin- istration and accounting. He then went on to build call centers for various unsecured debt and credit verticals before starting at Ross Diversified Insurance Services.
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