Contract Works Insurance

Frequently asked Questions around Contract Works Insurance and some things you may not know

Whose name should the policy be in? A Contract Works Insurance policy should be in the name of the Builder, as the main contractor including any other sub-contractors for their respective rights and interests. The Owner as the principal and any other interested party.

Who arranges the Contract Works Insurance? New Builds – the builder should arrange the Contract Works Insurance for new builds. Don’t forget to check limits for Goods in Transit as well as any Principal Supplied Materials.

Alterations – the owner should arrange the Contract Works Insurance in this case with the same Insurer who holds the actual House Insurance. Some House Insurance policies may be voided if there is structural work taking place.

Who pays the excess when there is a Contract Works Claim? The policy holder pays the excess, which is usually the builder for new builds, however, this may be contracted out of in your Building Contract with the owner. This should be clarified with the Property owner (Principal) at the time of signing the contract.

You would need to refer to your building contract to see who is responsible under the terms of your contract.

Annual Contract Works Insurance If you are doing a number of builds per year, the best option is to take out an Annual Contract Works Insurance. This is calculated on a declaration basis. The provisional premium is charged on an estimated number of builds over the 12 months and is then adjusted to the actual number at the end of the Insurance period. The benefits of having an annual contract works policy will attract a more competitive premium for you as well as ensuring that no contracts are missed. There will be a limit to any one build (maximum). Cash flow of these policies can be managed by paying your premiums in monthly instalments.

Excesses The Standard Excesses for Contract Works Insurance are usually as follows: $500 increasing to $1,000 for Burglary, Malicious Damage, Theft, Landslip & Subsidence. The Natural Disaster excesses vary depending on location of the contract and are shown as a % of the value at risk subject to a minimum $ amount. –For example, 2.5% of the value at risk subject to minimum $2,500. So, for a Contract price of $500,000 if you were half way through a build at the time of a natural disaster (earthquake, volcanic eruption, tsunami), the excess would be 2.5% x $250,000 = $6,250. The Natural Disaster excess could be as high as 10% for some locations so it’s a good idea to check this and point this out to your clients.

Remember to arrange your Contract Works Insurance before you put the spade in the ground. This way, you are covered for any landslip or damage to the site prior to pouring the foundations.

It is important to always refer to your broker and policy wording for full coverage details.