Contract Works Guide - For Lead Contractors and Sub Contractors
So you’ve won a new contract… How do you go about insuring it?
While it’s not always your responsibility to arrange the insurance as a professional it is your responsibility to not only cooperate with the person arranging it but to also provide as much assistance as possible*.
New Build Construction: For any new property built from the ground up generally the insurance is arranged by the lead contractor. If you are subbed onto a job as a sub-contractor or as labour only see the note below about sub-contractors.
Renovations and Fit outs: This is where it gets a little tricky, in most cases the principal (property owner) arranges the cover. Why you may ask? This is because they also need to insure the existing property during the renovation and this cannot be covered by you. It is best practice that the contract works insurance is placed with the same insurer as the existing property. If you regularly complete fit outs or installation work you can insure your contracts under an annual policy, with a maximum anyone contract.
Civil and Subdivision: Depending on the type of works being undertaken this can be insured as either an annual or one off project and by either the lead contractor or the principal. As this can be quite complex we suggest contacting our commercial team immediately on 0800 800 320.
The In’s and Out’s – A Quick Guide
What is contract works insurance?
Contract works insurance is sometimes referred to as builders risk insurance and the principle behind it is rather simple. Under most standard house and contents policies cover is excluded when major building work is undertaken or you are building a new home.
A typical Contract Works Insurance Policy will cover: Fire, theft, vandalism, construction collapse, natural disasters and accidental damage.
It will also cover a variety of extensions such as transit, materials in storage, expediting expenses etc.
Arranging contract works insurance
It’s in your best interest that there is insurance covering your contract. If you are the lead contractor you will need to be named on the policy regardless of who arranges the cover. Contact your broker if you or your client have any questions at all. Often if your client is arranging it direct with an insurer or through a bank, they lack a broader knowledge of contract conditions and policy wordings.
How much will it cost?
Costs can vary between insurers and are usually set by the cost of the contract, typically on a small renovation ($100,000 or 3months work) will cost around $250-350 + levies and GST. When tendering for a job contact your broker for an indicative quote, this way you know what cost to include for insurances.
Subcontractors
First question: Are the sub contractors covered? Well this depends on the requirements of the contract, not all contracts will require the main contractor to name the sub contractors as an insured on the contract works policy.
The Contract Works Policy should follow the requirements of the contract so it is essential to understand the contracts requirements and that the contract and insurance policy mirror each other in this respect. As a rule of thumb we recommend that you include the sub contractor’s extension (if not automatically covered) and we’ve outlined a quick guide below for you:
If you’re the lead contractor: While it may seem like a hindrance to name the subcontractors on the policy including them will help protect your client from delays and losses. It will also make you look good as the lead contractor as the insurer can proceed with getting the issue resolved rather than chasing liability policies.
If you’re the sub contractor: If you’re sub contracted onto a job you can request to be named on the policy, usually the main contractor will clarify if you are automatically covered but this can depend on your trade and the contract. It pays to know though so don’t be afraid to ask
Maintenance Period
Under the new Building Amendment Act (2013) the defect repair period is automatically legislated at 12 months. While this may seem like a long period if contract works insurance is taken on a job the cover can be arranged to include cover for a maintenance period anywhere from 3-12 months.
Our recommendation is that the homeowner or lead contractor should nominate the full 12 month maintenance period. This usually does not significantly increase the cost of the policy.
Principal Supplied Goods
Unlike the main portion of the contract which is automatically insured your client may want to supply materials, fixtures or fittings to the job. A common area for this is the kitchen and bathroom. If your client is wanting to supply these they must be noted on the policy as “principal supplied goods” which should be a nominated amount in addition to the contract sum insured.
Finishing the Job
The end of the Contract Works Insurance will vary between insurers and policy wordings it pays to understand each handover as some insurers will only insure a house once it has a COC. So when does the policy typically expire?
the policy end date,
practical completion,
when the owners start using/occupying the building,
if a spec house, when 95% of the budget is spent