Canadian Accredited Insurance Broker (CAIB) Two Practice Exam

What automatically causes coverage to terminate under a Builders Risk Policy?

1. Completion of all construction work

2. Registration of the building

3. Building becoming vacant and unattended for over 30 days

4. Change of ownership of the project

The correct answer is: Building becoming vacant and unattended for over 30 days

Coverage under a Builders Risk Policy automatically terminates when the building becomes vacant and unattended for over 30 days. This provision exists because the risk profile associated with the building changes significantly when it is unoccupied. A vacant and unattended building is more susceptible to various risks such as vandalism, theft, and damage from weather elements, which may not be as concerning when construction is ongoing or if the property is occupied. Other factors like the completion of construction or changes in ownership do not immediately affect coverage under such a policy. Completion of all construction work typically triggers a transition in coverage rather than automatic termination, as policies often have specific clauses detailing the post-completion phase. Registration of the building is also not a determining factor for termination of coverage, and while a change of ownership might have implications for the policy, it does not lead to an automatic cessation of coverage either. Thus, the 30-day vacancy rule serves to mitigate the insurer’s risk associated with a building's exposure when it is left unattended.