Construction Works Insurance otherwise known as Contract Works insurance, is taken out to cover either a specific single project construction, or annually to cover all projects of a certain type.
Coverage is generally arranged by the principal or head contractor and provides access to two sections of coverage. Section one covers Material Loss or Damage and Section two covers both Public Liability and Products Liability for third party property damage or third party bodily injury arising out of the actions you are liable for.
There are two basic types of Contract Works insurance policies, either
1. Turnover (Transfer), or
2. Run-off (Contract commencing)
The differences are important and are best illustrated by this explanation below.
This insures all projects being, or planned to be, worked on during the policy period. You are insured for any incident that occurs during the policy period.
If the project is not completed prior to Practical Completion Date at the expiry of the policy, the insurance ceases, unless the policy is then renewed with a Turnover (Transfer) policy. In terms of the Defects period, if the project is not completed prior to the the expiry date of the policy, the Defects insurance period is not provided.
This insures all projects that meet the limit and type of projects advised to insurer, that begin construction during the policy period, right up until the construction and its defects liability period is completed.
There can easily be a gap in coverage if you change from a Turnover policy to a Run-Off Contract Commencing policy if a policy is changed at renewals. A thorough review of your policy type should be undertaken, if the insurer is being changed at renewal in order to ensure their are no construction projects uninsured inadvertently.
Based on a Principal Controlled Insurance Programme (PCIP) the entities or persons normally insured by a Contract Works policy that will also reflect the provisions of the construction contract in place will include:
The policy schedule will describe the type of property or business activities that can be insured eg. Residential New Build, Renovations or Commercial construction project builds.
The actual work itself can comprises construction or erection itself including formwork, falsework, temporary works, temporary buildings, scaffolding, hoardings, principal supplied or free-issue materials, and materials for incorporation in the works. In some policies, insurers will agree to coverage for the pre-existing buildings or structure that is having renovation work or an alternation performed on it.
The major advantages of a principal having control over your construction insurances in comparison to individual contractors having separate Contract Works policies are that.
Standard automatic benefits in a Construction policy include:
Construction insurance policies have various exclusions and limitations. In some cases these exclusions can be limited or restricted by agreement with insurers. We would recommend that the exclusions.
The major exclusions under Material Loss or Damage section are:
Major exclusions under the Liability section include
Our experiences indicate the major exclusion that insurers apply upon, relates to incidents arising from Design, Material and Workmanship issues. We strongly recommend having a discussion on all exclusions, but certainly this one, when discussing coverage with your insurance broker. There are different types of exclusion wordings available in the market.
Construction policies can be individually tailored to your needs and can include additional benefits such as:
For a full discussion relating to these benefits, please discuss with Business Insurance Specialists.
There are other insurance products which can be considered by builders including:
Construction projects are unique and have their own challenges. If an incident or unexpected disruption occurs and you do not have the right protection in place, it can significantly impact your project timetable and leave your business exposed on both the bottom line and legally.
Business Insurance Specialists Pty Ltd is a specialist insurance broker to the construction industry.
Our insurance brokers have significant experience covering commercial and residential building (including high rise), civil, industrial and infrastructure projects. and can therefore provide you with the expert risk advice you need to thrive.
For a no obligation review of your Contract Works insurance contact us today on (07) 3139 3900.