Contract Works Insurance

How long are you covered for?

December 2011

There is no doubt that contract works and public liability insurance is a vital tool for protecting your building business. Not only that, it is often a condition of many industry construction contracts. Unfortunately not all contract works insurance policies are the same, and establishing which product is best for you can be a complicated and time consuming task. A particularly confusing aspect being that the policy period specified on the schedule and the period of cover under the policy are not necessarily the same thing.

Some policies operate to cover all contracts that you are working on during the policy period (“Turnover Basis”), whereas other policies operate to cover all contracts that you commence during the policy ("Contracts Commenced Basis"). The Turnover Basis policy will stop the insurance coverage when the policy period expires on the nominated expiry date, however the Contracts Commenced Basis will continue the insurance until the project is fully complete. This however is only the tip of the iceberg in determining how long your project will be covered for.

Aside from differences in which projects the policy will pick up, most policies will have a specified maximum construction period, meaning that if works are not completed within this timeframe, cover for that project under the policy ceases! Many policies will only provide a maximum construction period of 12 months. Although this may seem like plenty of time to finish most projects, larger and more complicated projects can take longer to complete. Even with smaller projects, unforseen delays such as inclement weather, owner’s financial difficulties and delays in obtaining materials etc. may potentially result in a project taking significantly longer than anticipated.

The most concerning aspect of this cover restriction is that insurance may cease at a time when your project is at its most expensive stage. Consider the impact on you if a large project was destroyed by fire just days prior to completion/handover, only to find that it is uninsured because you took more than 12 months to build it.

At BRIC, we ensure that terms we offer provide a minimum 24 month construction period, and can negotiate longer timeframes if required.

Another noteworthy issue surrounding potential limitations in the level of cover is that of cessation of work. Many policies contain clauses that effectively cease to provide cover in the event that work on a construction site has not taken place for more than 30 days. More generous policies will allow up to 60 days before cover ceases on the site. Whilst no one would like to think that they would stop work on site for an extended period of time, project delays or disputes with owners could lead to the site being unattended for more than 30 days, particularly if the delays coincide with a significant break during the summer months.

The above issues are a couple of areas where some policies may be substantially inferior to those offered by BRIC. They also highlight the importance of using a specialist broker such as BRIC to negotiate your construction insurances and ensure that you are getting a product that best suits your needs. Saving a couple of hundred dollars on your premium now could mean the difference in your claim being covered or not, which could result in costing you hundreds of thousands of dollars.

Feel free to Contact us to discuss your individual construction risks insurance needs.

To the extent that any of the above content constitutes advice, it is general advice without reference to your needs or objectives and therefore cannot be relied upon. Before acting on the above information you should obtain advice specific to your needs.

 
 

BOVILL RISK & INSURANCE CONSULTANTS

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