1. Forms
2. DP
3. DP-11-43

What the Form Is

The DP 11 43, titled "Dwelling Under Construction," is an endorsement used to modify standard Dwelling Property forms (such as DP 00 01, DP 00 02, or DP 00 03). Its primary function is to convert the dwelling policy into a builder's risk type of coverage tailored for a dwelling that is in the process of being built. A key feature of this endorsement is that the limit of liability for Coverage A (Dwelling) becomes provisional. This means the coverage limit automatically adjusts to reflect the increasing value of the dwelling as construction progresses. The premium for this coverage is often calculated based on the average insurable value of the property over the course of construction, which can be lower than the premium for a completed dwelling.

Classes of Business It Applies To

This endorsement is specifically designed for situations where the named insured is having a dwelling built and intends to be the occupant of that dwelling once construction is complete. It is suitable for:

• Individuals or families building their primary residence.
• Property owners constructing a secondary or seasonal dwelling for their own use.

Real-world example: A couple purchases a lot and hires a contractor to build their new single-family home. They would obtain a Dwelling Policy and add the DP 11 43 endorsement to ensure the structure is covered throughout the construction phases.

Special Considerations

• Named Insured's Intent: This form is typically used when the named insured will be the eventual occupant of the dwelling. If a builder or developer is constructing a home for speculative sale (i.e., the intended occupant is not the named insured), this endorsement may not be appropriate, or the policy terms (including premium calculation) might differ; in such cases, the policy declarations might simply state the dwelling is under construction.
• Provisional Limit: The Coverage A limit is provisional. At the time of a loss, the actual payable limit is typically a percentage of the provisional limit shown in the declarations, corresponding to the proportion of the dwelling's actual value at the time of loss compared to its anticipated completed value.
• Premium Adjustment: The premium is often significantly reduced (e.g., to 65% of the completed value premium) because it reflects the average exposure over the construction period rather than the full value from day one.
• Notification of Completion: The insured is generally required to notify the insurance company once construction is completed. At this point, the policy will need to be adjusted or rewritten to reflect its status as a completed dwelling.
• Temporary Occupancy: Some versions may permit occupancy of the dwelling under Coverage A for a limited period (e.g., 30 days) after completion, but the specific policy language should always be consulted.
• Contractors: Contractors working on the site are typically not automatically covered as insureds under this endorsement. The DP 04 41 (Additional Insured) endorsement might be used to add a contractor if necessary.

Key Information for Agents and Underwriters

• Risk Assessment: Underwriting should focus on the construction project itself, including the type of construction, the builder's experience and reputation, site security, and fire protection available during construction.
• Valuation: It's crucial to establish an accurate provisional limit based on the dwelling's anticipated completed value. The mechanism for determining the actual cash value or replacement cost at various stages of construction should be understood.
• Policy Transition: Agents must manage the transition of coverage from the DP 11 43 to a standard Dwelling Policy (or Homeowners Policy if applicable) once construction is complete and the dwelling is ready for occupancy. This will involve adjusting limits and premiums.
• Coverage Gaps: Ensure clarity on when coverage under the DP 11 43 begins and, more importantly, when it ceases, to avoid potential gaps in coverage, especially around the time of completion and initial occupancy.
• Eligibility: Confirm that the named insured intends to occupy the dwelling. If not, alternative builders' risk coverage may be more appropriate.
• Theft of Building Materials: While the endorsement provides coverage for the dwelling structure, specific limitations or sub-limits for theft of building materials not yet incorporated into the structure should be reviewed in the base policy and any applicable endorsements.