Help On Insurance - Occurance Premium, Occurance With Sunset, Or Claims Made

DoubleJ

I just passed the General Contractor exam last week and I'm trying to get liability and property insurance to get my license. I can't believe how expensive it is. I've had quotes everywhere from $2000 to $45,000 just to build houses. Most of them have options with different prices. Option 1 Occurance Premium is the best. Option 2 Occurance with Sunset is next. Then comes Claims Made as the cheapest.

What do most of the home builders use, and what do they pay? I'm looking at $1M liability and $250K property. I could get away with just $50K property. I plan on building one to five homes a year that will sell around $750K each.

send_it_all

Last I checked, Gen. Liability is not required to get a license..at least in Ca. It is a good idea, but not required. Yes, it is very expensive. In Ca. all you need is a bond, and worker's comp or to have filed an exemption (sp?) from worker's comp, if you dont have any employees.

DoubleJ

In Florida, general liability for $300K and property insurance for $50K is required to get your license. I'm wondering what most Home Builder's use, Option 1, 2, or 3?

SeanATL

I don't mean this in the wrong way, but how did you figure you could make money building houses if you didn't know what the costs are? You know what I mean?

You need to know everything involved before you dive in....in my opinion.

I'm not a homebuilder so I can't directly answer your question. But, as a former CFO and a CPA.....I can tell you you're going to have to pass those costs on to your customers.

I think you may actually build one to five houses a year that sell for $800k......you know what I'm saying?

DoubleJ

Believe me, before I quote a price on a home, I'll know what the costs are pretty close. When I built my home, I estimated I could build it for $152K. I built it for $148K.

Before I took the GC exam, I researched this web site many times trying to find out what GCs building homes were paying for insurance. I saw a few who said they were paying $900 - $1000. Now comes the time to actually get the insurance and no one comes close to that figure.

I also called and wrote several insurance companies before I took the GC exam to determine how much my startup costs would be. I didn't get one single answer, probably because I hadn't taken my GC test yet.

I'm getting quotes now and was wondering what other GCs building homes were paying and with whom. If I find a better deal, I'll get on it. Any help would be appreciated. Anybody?

theartisan

since you are starting out, you have to "forecast" what your gross annual sales will be. Did you forecast building 5 homes at 750k for 3.75m, or 1 home at 750k? that will have an impact on your premium.

If your forcast is lower than actual sales you will have to pay an additional premium at your audit, but your initial expense will be lower. If you realize you are going to exceed your forcast, prepare in advance and place the premiums in an interest bearing account until it is time for your audit.

After a few years you will have a better idea of where your gross sales projections/payroll will be and have a more accurate forcast.

Your premiums will also be lower after a couple of years b/c you are an established company, business liability is similar to car insurance. When you are 16 and wet behind the ears you pay out the ass for insurance, when your 30 married with kids and have no claims you pay a fraction of those premiums.

DoubleJ

For the first year, I forecasted completion of the site work for a 10 home subdivision and one-half of one home for a "sales" figure of $500K. Out of this, labor costs are projected to be $150K to $250K.

The best I've found so far is $1948 (Claims Made) to $3366 (Option 1) for the $150K labor cost. These rates don't sound too bad and I'll probably go with them, assuming the paperwork looks good when I get it. So far, the quote is verbal.


Still waiting on other quotes. Any other home builders with better quotes?