Is the contractor likely to convince the carrier to extend the policy for the additional three months pursuant to the change order or will the contractor need to renew for one year (in either case, renewing at the now larger completed value amount), and if the latter (if the contractor must extend for one year), can the contractor cancel after three months and receive premium reimbursement for those unneeded nine months of insurance?

New York Subscriber

The Insurance Services Office (ISO) rules for builders risk coverage state that builders risk policies can be cancelled pro rata upon completion of the building, so yes, if a contractor is three months into a year renewal when the project is completed, the unneeded nine months of premium will be refunded. If the policy limits need to be increased during the policy term, the premium is calculated from the inception date of the policy to expiration. So, the pro-rated amount returned would be based on that increased premium if the contractor needs to increase the policy limit during the term.

The ISO rules do not mention whether a policy can be extended or if it must be renewed. This may be up to the carrier to decide.