Builders Insurance - Contract Works including Liability

WHAT TYPE OF INSURANCE DOES A LICENSED BUILDER REQUIRE?

Depending on the size of the builder, a Licensed Builder may require a combination of several policies:

Contract Works Insurance to cover Material Damage to the Project and Public Liability for the entire Project Site
Business Insurance if you operate from an Office, Depot or Warehouse to provide cover for your business owned equipment and stock at your business premise.
Professional Indemnity Insurance for builders who design and construct. It may also be a contractual requirement for larger projects.
Management Liability Insurance to provide protection for the company and its directors for how the business operates.
Cyber Insurance to provide protection against online and cyber crime, most commonly we see for construction trades is where an invoice is intercepted and payment is made to the wrong party resulting in loss of funds which cannot be recovered. A cyber policy is much more than cover for a website.
Mobile Plant and Machinery Insurance for both owned and hired in plant, including excavators, EWPs, cranes and other mobile machinery both at the site and when in transit to or from the site.
Commercial Motor Vehicle and Heavy Vehicle cover for your sedans, utes, vans, wagons, trucks and trailers.
For large single project builders in mid and high rise developments a decennial building defect policy can be arranged before a project commences to provide cover for defects that are discovered in the ten years post construction. On completion of the project, cover transfers to the owners to provide
Pollution Liability Insurance to provide cover for the cleanup and decontamination as a result of accidental contamination at a construction site.
Workers Compensation Insurance where required by state legislation. For NSW this can be arranged with iCare online here: NSW Workers Compensation Insurance - Arrange online
Home Warranty Insurance where required by State Legislation.

Contract Works Insurance and how is it different to a trades package insurance policy?

You may currently have a Business Insurance or Trades Insurance Package Policy. This is not a contract works or construction insurance policy and does have different cover. A contract works insurance policy generally has two parts, part a material damage and part b liability.

The material damage part of a contract works policy is intended to cover damage to a project whilst the project is under construction. Whether this is a bushfire, storm, flood or theft from the site, the intention is to ensure that you and your customer do not have to repay for the cost of materials to rebuild the project to where it was at prior to the event occurring.

It is possible (though not always included) to also cover your tools whilst on site and your mobile plant / hired in plant (like excavators or EWPs) on the project site, this cover is known as minor plant (tools) and major plant (excavators etc). If you require cover for tools or plant, you should check you have sufficient Minor or Major Plant sum insured. This often replaces a general property policy that you may have taken with your trades insurance package.

The liability section of the policy replaces your trades public liability policy. There are a number of common exclusions within a trades insurance package such as;

Height Limitations or Restrictions - Usually in the exclusions of a tradesman package, you are not covered for loss or damage when you are working above xm where x could be 6, 8, 10 or 12 meters.
Hot Works Exclusions - Welding, Flame Cutting, Torch Lamps, Hot Air Guns and Soldering Irons are some of the types of activities often excluded by a Trades Insurance Package under the Hot Works Exclusion.
Depth Limitations - Usually 2 or 4 m in depth will be excluded under a tradepack
Vibration and Weakening of Support Exclusion - A common exclusion in a trades or business package but can be easily covered in a contract works insurance package.

If you manufacture items for sale as a part of your business, this is not usually included in all contract works policies. For instance, a concrete company with contract works that manufactures and sells without the installation of items such as garden edges, pre-cast slabs, culverts etc, this would require an extra cover not often included. It is important to ensure that we understand all your business activities.

If you operate from a Depot or an Office, you may still require business insurance to protect your office or depot fitout and computer equipment from damage by fire or storm, or, from burglary and consequential losses.

For more information on what type of insurance you need, contact our office on 1300 429 707.

FAQ - CONTRACT WORKS INSURANCE FOR LICENSED BUILDERS

WHAT IS THE DIFFERENCE BETWEEN A RUN-OFF CONTRACT WORKS POLICY AND A TRANSFER BASIS POLICY?

A run-off cover contract works insurance policy covers all projects that commence during the policy period. This type of policy covers the project from the commencement date until the project is completed, even if the completion date is after the period of insurance has finished.

A transfer basis policy on the other hand covers only the portion of the project that was completed during the period of insurance.

As an example, if you have a policy that runs from 1st Jan to 31st Dec and start a project in October, under a run off policy you declare this project to the insurer on your annual declaration only once in December and pay based on the whole project value. A transfer basis policy however, you would declare the portion completed between October to December and then the following year, declare the portion completed between Jan and the completion date.

As the adjustment premium is quite often the same rate as the original policy, a run-off policy will more likely have a fixed cost for your projects when compared to a turnover basis policy where the rate may change on renewal affecting the 2nd declaration you have to make.

I HAVE $10 MILLION PUBLIC LIABILITY AND $10 MILLION PRODUCTS LIABILITY. DOES THIS MEAN I HAVE $20 MILLION COVER?

In most cases no. Most contract works policies will refer to the Public Liability Insurance and the Products Liability Insurance within the Product Disclosure Statement (Policy Wording) as two separate covers, each with their own limit of indemnity.

I AM A RESIDENTIAL BUILDER AND HAVE AN OPPORTUNITY TO COMPLETE A SHOP FIT OUT PROJECT, WILL MY POLICY COVER ME?

In most cases no, not unless you have already disclosed in your estimate that you may undertake commercial construction. Residential construction and commercial construction will generally have different rates. Even though you will be required to declare the project at the end of the year, you may not be insured for the construction unless you advise the insurer before you start the project. If in doubt you can contact our office to discuss you planned projects and your policy coverage.

MY CONTRACT REQUIRES MORE THAN $20 MILLION LIABILITY

It is becoming more common for a tender to request that a builder have in place a $30 Million or even $50 Million Public Liability Insurance Policy. You may already have $20 Million cover and your existing insurer may not be able to extend that to the amount you need.

In these cases we can arrange for you an Excess Layered Liability policy. This additional policy sits on top of your existing Liability insurance and adds to the amount of cover you have. For instance, if you required $30 Million total and already have a $20 Million Liability policy we can help you arrange the additional $10 Million Excess Layer Liability without affecting your existing policy. The excess layers are annual policies and not project specific.

We do have some contract works insurers and public liability underwriters who are able to arrange up to $50 million as one insurance programme if you are willing to review the existing policies.

MY CONTRACT REQUIRES PROFESSIONAL INDEMNITY COVER

In some contract works policies, it is possible to also add cover for incidental professional indemnity such as a claim arising from incidental project management services or an accidental change to the building ‘plans’. Such services, errors or omissions are often excluded by trades packages, business packages and some contract works policies. It may also be possible to provide you with a stand-alone incidental professional indemnity insurance policy. Contact our office for more information.