Canadian Accredited Insurance Broker (CAIB) Two Practice Exam

In the context of the Builder's Risk Policy, when does occupancy not invalidate coverage?

1. When a residential lease is signed

2. When the space is used for construction work

3. When there is ongoing interior decoration

4. When there are construction inspections scheduled

The correct answer is: When the space is used for construction work

The Builder's Risk Policy is specifically designed to provide coverage for buildings under construction or renovation. Coverage typically continues as long as the property is being used for its intended construction purposes. When the space is used for construction work, the policy remains valid because the activity aligns with the purpose of the insurance. In contrast, other scenarios may lead to potential issues with coverage. For instance, signing a residential lease suggests that the property is now being occupied for living purposes rather than construction. Ongoing interior decoration might imply a level of occupancy or completion that strays from the construction theme, possibly risking coverage validity. Similarly, if construction inspections are scheduled but the main focus of activity is shifting away from construction, it can also create complications regarding coverage under the policy. Therefore, occupancy does not invalidate coverage when the space is actively used for construction work, as this is inherently what the Builder's Risk Policy is intended to protect.