Canadian Accredited Insurance Broker (CAIB) Two Practice Exam

When does coverage under the Builders Risk Policy typically cease?

1. When construction work is completed

2. When site inspections are done

3. When building comes into use

4. At the end of the contract period

The correct answer is: When building comes into use

Coverage under a Builders Risk Policy typically ceases when the building comes into use. This is because Builders Risk Insurance is specifically designed to cover buildings while they are under construction or renovation, addressing the risks associated during this transitional phase. Once the building is completed and ready for occupancy, the nature of the risk changes significantly. At this point, other forms of insurance, such as a Property Policy, are more appropriate to continue protecting the asset. The timing of when a building becomes occupied marks a critical transition in insurance coverage requirements. While the construction phase may include various inspections and could also relate to the completion of the project, it is ultimately the readiness and use of the structure that signifies the end of Builders Risk coverage. Thus, the cessation being tied to the building's use accurately reflects the purpose and limitations inherent within this type of policy.