Contract Works Insurance and the long-term impact of COVID-19

With COVID-19 restrictions easing and everybody being back on the tools and working to capacity, the global supply chain is now struggling to keep up with demand. With the stockpile of materials now depleted, the construction industry is suffering from lack of supplies and availability.

We are now seeing the impact this is having on the building process and the flow-on effect to the insurance you arrange for your builds. These delays are all important concerns which need to be considered and factored in at the commencement of the Contract Works Insurance.

Single Contract Works

When arranging Contract Works Insurance ensure you factor in the additional time it may take to get supplies on-site, any change in availability of certain products and of course any delays with council. It is generally more cost effective to add a few extra months at the commencement of the policy, rather than arranging for an extension to the cover when the policy reaches its expiry date.

If the job is a renovation and the homeowner is arranging the Contract Works Insurance, please have a conversation with them around all the possible delays and provide them with a realistic expected handover date. This way they can set their policy up with their insurer for an appropriate cover period from the outset.

Annual Contract Works

If you have Annual Contract Works Insurance this is the time to check on the total construction months you have specified for the policy. On the policy schedule you have received from your broker or insurer this will be specified and look something like the example below. It is very important also that you have the ‘Maximum Contract Period’ set appropriately. As shown in the example, if your build went for seven months and two weeks then that build is not covered by the policy. As soon as the build period exceeds the declared maximum contract period specified, the policy does not cover that build. This is also applied to the ‘Limit Any One Contract’, if the contract value exceeds the amount specified, that contract is no longer covered under the Annual Contract Works Insurance.

Description of Contract and Sums Insured Contract Site(s) Various within the regions declared Contract Description Annual Contract Works Contractor XYZ Contruction Limited Limit Any One Contract $500,000 Maximum Contract Period 7 Months Maximum Maintenance Period 12 Months Estimated Annual Turnover $3,000,000

As soon as the build period exceeds the declared maximum contract period specified, the policy does not cover that build.

Additional Important Facts

In our last article we included a number of important facts about Contract Works Insurance and as these are so important, we have included them again below: • For new builds the cover automatically cancels if the homeowner takes possession of the home • If the expiry date passes, the policy automatically cancels.

If you need an extension you need to contact the insurer or broker at least a few days prior to the expiry date • Make sure the policy mirrors the contract requirements • Notify the insurer of any damage, potential damage or loss immediately • Policies have a clause for cessation of work – this means if work stops for a period of usually 60 days the policy automatically cancels

For a review of your existing portfolio or more information on this topic, NZCB members can contact BrokerWeb Risk Services on 0800 644 444.

REDi Builders’ Insurance is administered by BrokerWeb Risk Services Limited and is exclusive to NZCB members. BrokerWeb Risk Services also operate the NZCB members’ only, Insurance helpline and can be contacted on redi@bwrs.co.nz or 0800 644 444.