Property and Casualty Insurance Practice Exam

Which factor would NOT cause Builders Risk coverage to cease?

1. The insured decides to upgrade the building materials

2. The building is accepted by the purchaser

3. Ninety days have elapsed since construction completion

4. The building is occupied or put to intended use

The correct answer is: The insured decides to upgrade the building materials

Builders Risk coverage is specifically designed to protect structures under construction. The coverage typically ends when certain conditions are met, primarily when the construction project is finished or the property is put into use. One crucial aspect of Builders Risk coverage is that it will not terminate simply due to upgrades in materials used during construction. This implies that as long as the project is ongoing and no significant events occur to trigger the end of coverage, such as the completion of the project, the policy remains in effect regardless of improvements or changes to the materials. This allows builders and contractors flexibility in enhancing quality without fear of losing coverage. On the other hand, factors such as the building being accepted by the purchaser, occupancy implications, or the passage of a specified time since completion are all conditions that typically result in the cessation of coverage. Hence, the option stating the insured's decision to upgrade building materials is valid in maintaining the continuity of coverage under the Builders Risk policy.