Evaluating the Risk of Not Managing Risk

January 29, 2015
January is the time of the year when most of us sit down to evaluate our insurance plans, our company portfolio, and our profit and loss reports. We prepare our business for the upcoming year. For builders, it is important to take stock in your successes and evaluate any challenges that you have faced throughout the previous year. Shedding light on a subject that may assist in upcoming profits and reducing risk, you may want to consider your warranty company as part of the team and an important part of your Risk Management plan in the event of Structural Failure on any of your projects.

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Statistics from a recent NAHB survey tell us that 25% of homes will show some sort of structural distress over their lifetime. The highest percentages of claims were found to be due to foundation failures, most due to soil settlement. Framing claims attributed to approximately 20% of structural claims, most prevalently in the form of roofing and flooring failures. Statistically, the average cost of a structural failure is $42,000 to investigate and repair. The study also reported that, on average, it isn’t until after the fourth year (or later) when most of these claims are discovered.** Many builders think they will not be one of these statistics until it is too late. This mindset can cause builders to fail to protect their assets with a risk management program until it is too late, even though the simple addition of a 10-year insured structural warranty will assist in protecting them.

Now that we have discussed statistics, let’s consider a few things:

 1.  “Is my company insured for these losses should we become a statistic?”

When you are working with PWSC and you have a risk management plan (such as our Signature 10-year Insured Builder’s Limited Warranty Program) in place, you have taken the extra steps to protect your company. The PWSC 10-year Insured Warranty is backed by a superior rated insurance company with clearly defined tolerances throughout the terms of the program. “How long are we responsible and held accountable for the structural integrity of our homes?”

  2.  “How long are we responsible and held accountable for the structural integrity of our homes?”  

Each state has a statute of repose that designates a period of time in which a lawsuit must be filed for a structural defect. These lawsuits may be filed for property damage based upon an alleged latent defect within the states required limitation. To determine your states statute of repose, your PWSC Regional Sales Director would be a great resource to contact.

3.  “How can I protect my company and make risk management a priority?”

With a PWSC Signature Warranty in place, your company has Structural protection for ten years should a latent defect occur or a claim be made on a home your company built.

Let’s Compare: Risk Management vs a “Take My Chances” Approach

Driving a car daily, most people cannot and will not “take my chances”. Accidents happen by your own doing or that of someone else. For this risk protection you pay for the required car insurance. Isn’t this similar to building a new home? As the homebuilder, you strive to build the best home possible for your buyers. Your goal is to keep your clients happy while they live in their new homes. Happy clients bring future referrals. You also want to be assured that your subcontractors have the same goals in mind and that there are no “hidden defects.” If any of these components do not happen, as the builder, you have the reassurance that you have taken the extra step to protect yourself and your homeowners with the 10-year Insured Signature Warranty from Professional Warranty Service Corporation.

In addition to offering the PWSC 10-year Insured Warranty as a risk management tool, it will also benefit your company as a great sales tool when marketing your new homes and your buyers’ future resale homes. These topics will be discussed in more details in later poststhis year, so check back on the PWSC Blog regularly. .

With a PWSC Warranty in place, it is a very concrete example of the way you stand behind your workmanship and service your customers. For additional information about how PWSC may help you manage your constructionriskand how to utilize the warranty as a marketing tool, please contact your Regional Sales Director.

Wishing you a year filled with happy buyers, easy nights of sleep and a Prosperous and Happy New Year!

** Source: NAHB Survey – The Value of NAHB Membership #38