Most uncovered construction claims do not begin at the moment of loss. They begin months or years earlier, in the gap between how a builder actually operates and what an insurance policy was written to cover. Treacy Duerfeldt, a construction insurance specialist, has spent his career closing that gap, and his central argument is that it is widening, not shrinking, because the insurance industry consistently fails to keep pace with how buildings are built and how homes are used. “If we don’t have insurance products that address this, we need to develop those,” Duerfeldt states. “Innovation is very important in understanding the new building technologies, the different things in our culture affecting how and why we use homes.”
The Coverage Gap Is a Language Gap
The most immediate source of uncovered claims is not a missing policy. It is a misunderstood one. Policy language written in insurance jargon rather than plain English creates a persistent translation problem, and builders who cannot understand that language may inadvertently leave entire project types uninsured until a claim is denied. Duerfeldt points to a concrete example: townhomes, row houses, and condos may be excluded from commercial policies written only for single-lot-line or zero-lot-line exposures. A builder unfamiliar with that distinction can complete an entire project under the assumption that it is covered, and discover the truth only when a claims adjuster reviews the policy language and issues an initial denial.
Subcontractor documentation requirements pose the same hazard: whether subcontractor costs include furnished materials is a question whose answer materially affects how the insurance company prices the product. “Policy language that underwriters use may not even address the specific home building context that is intended to be covered,” Duerfeldt points out. Agents specializing in residential construction must understand the full construction process to write policies that reflect operational reality, rather than defaulting to generic language that leaves builders exposed.
Captive Insurance as a Strategic Tool
The second frontier Duerfeldt pushes builders toward is captive insurance, a structure that allows coverage to be built for risks that commercial policies will not touch. The examples he cites from his own work illustrate how creative this can get. Working with a team, he developed lumber price variance coverage within a captive structure, triggered when publicly available lumber price data shows growth exceeding a defined threshold. When material costs spike and a builder absorbs income losses, the captive participates in that loss – a protection no standard commercial policy provides.
The same approach has been applied to the financial consequences that devastated builders during the 2007-2008 crisis: lines of credit evaporating, excessive interest rates eroding profitability, and consumer demand collapsing as mortgage rates spiked. Each of these represents a loss of a business model. None of them is insurable commercially. “When you look at creativity in the insurance world, those two words don’t naturally go together,” Duerfeldt acknowledges. But for builders willing to explore captive structures, the universe of coverage expands significantly.
The Affordability Problem Builders Are Not Tracking
The macro risk Duerfeldt believes will catch builders most off guard is not wood frame vulnerability or climate exposure in isolation; it is the compounding effect of all external factors on the affordability of the homes they are selling. Homeowners’ insurance is typically priced at approximately 0.5% of a home’s value. In several U.S. states, it has reached 2%, a fourfold increase that makes homes unaffordable in ways that mortgage rate increases alone do not fully capture, because insurance costs apply to the full home value rather than just the borrowed amount.
Builders who do not incorporate homeowners’ insurance cost minimization into their business models are building a customer affordability problem into every project. Practical responses include resilient building methods and Homeowners Association (HOA) guidelines that manage fire load within neighborhoods. Publicly available Federal Emergency Management Agency (FEMA) maps provide builders with the same data that underwriters use to price risk, enabling proactive site selection before premium changes take effect. Duerfeldt has developed a free homeowners’ insurance crisis course covering this material, available here. “If you have no top line,” he reflects, “you don’t worry about the bottom line.” The builders who navigate the next cycle will be the ones who treated insurance not as an annual procurement exercise but as a strategic discipline, understanding the language, anticipating the data, and building coverage structures that reflect how they actually operate.
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