i nsurance concerns to keep track of

TAMARRA MATTHEWS MASTER BUILDERS SENIOR ACCOUNT MANAGER INSURANCE

Project delays are now an everyday frustration for the industry following the pandemic.

While the causes are many and varied, the problems have been compounded by the continuing impacts of supply chain disruptions, global surge in demand for building materials, international conflicts, and impacts of severe weather events. The situation has eased, however, uncontrollable delays appear set to remain for the foreseeable future.

If the challenges of running your business in this environment aren’t hard enough, unplanned delays and escalating costs may also have implications for your insurance protection.

Policies

Most construction policies place limits on the insured works, so it’s important to review ongoing projects against the policy to ensure things remain within your limit parameters. Policy limitations can cover the Scope of Work, Construction Type, Location, Maximum Project Value, Defects Liability Periods, and Maximum Project Period.

In addition to these limits, it is also common for policies to include a Cessation of Works clause and a Variation and Escalation Allowance. While policies generally provide cover for short periods of cessation, an insurer typically restricts the time a project can remain static.

Variation and Escalation Allowances help provide cover for additional works and inflationary increases, however the recent materials cost increases are likely to have exceeded any policy benefit.

It’s prudent to regularly review ongoing projects against policy conditions throughout the policy period to avoid uninsured losses. In the current climate, it’s particularly important to review a project against the Maximum Project Value and Maximum Project Period.

These limits will vary between policies, so it’s important to check and not assume. Should damage or loss arise on projects exceeding policy limits, a policy may not respond to a claim.

In relation to the Maximum Project Period, the policy coverage generally spans from commencement through the construction phase until practical completion. It is advisable to consider additional time allowances after practical completion, as some contracts require extended cover.

If you hold an annual construction works policy, it’s important to establish the basis of your policy. In simple terms, this means, from the commencement date, does your policy cover only new projects commenced, projects already underway, or both. If undertaking speculative works, it is advisable to consider the period after completion pending sale.

For strata title projects, it is important to consider any gap between practical completion and strata registration.

Special insurance arrangements

Finally, in the event of partial occupancy during ongoing construction, special insurance arrangements may be necessary to ensure cover.

All the above considerations are by no means exhaustive but should serve as food for thought during this ongoing period of supply chain disruptions. Please remember there is no substitute for reading the policy documents. Beyond that, it may be wise to speak with your insurance broker. Preferably one that specialises in construction insurance. 

If you’re seeking insurance advice, call Master Builders on 1300 30 50 10.