Construction Insurance

Get protection against accidental damage and third party losses with Construction Risk Insurance

Construction Workers

Construction All Risk Insurance (also known as Builders Insurance or Construction Works Insurance) provides comprehensive cover for all construction-related activities of a construction project under a single policy. This ensures all parties involved in the development are adequately covered for the numerous risks faced during production including:

  • Accidental damage and physical loss to the project
  • Damage to property or injury to third parties
  • Loss of profits of the project

This cover can be taken out to protect all parties involved in project including the project owner, contractors and suppliers. This cover can be taken out for single projects or for annual contracts works.

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If you are ready to speak with a consultant about different business insurance options available, simply enter your details in the form. Keep reading if you want to learn more about the different types of cover available.

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What does construction risk insurance generally cover?

Construction risk insurance offers protection for building works in progress against loss or damage caused by a wide range of risks. It covers loss or damage caused by:

  • Theft and malicious damage
  • Wind, storm and flood
  • Other water damage
  • Fire and bushfire
  • Cyclone
  • Tsunami
  • Landslide and subsidence
  • Earthquake

Per project vs annual cover

Construction risk insurance can be arranged on a per-project basis or taken out as an annual policy to cover all projects undertaken across a 12-month period. It covers the builder, the property owner, contractors and subcontractors against any loss, but can also be tailored to include other professionals such as project managers and architects.

Is defective work covered?

While no cover is available for damage caused by defective works, it’s important to check how your policy will cover you when works are completed correctly but damage is caused by defective materials, workmanship or design in other parts of the construction project.

What else can I get cover for?

Construction risk insurance covers all property that comprises the construction project, as well as items such as scaffolding and on-site amenities. Most policies will also allow you to include cover for tools, equipment, plant and machinery against on-site and off-site losses. Other costs you can cover include:

  • Items the owner supplies to be included in the construction project
  • Professional fees when repairing insured damage
  • Debris removal costs
  • Damage mitigation expenses
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Types of cover available

Construction insurance encompasses a broad range of different liabilities and finding the right level of cover for your business can be a confusing task. An insurance broker can help tailor a policy to match the cover requirements of each and every builder or organisation, so take the time to seek expert advice.
The following types of cover commonly fall under a construction insurance policy:

CoverOverviewWhat's can be covered?What won't be covered?
Public LiabilityInsurer will indemnify you against public liability claims and will provide cover if an employee suffers an injury or business property is damaged.
  • Legal costs and expenses for claims made by third parties
  • Claims for physical damage to or destruction of goods in your control
  • Claims for injuries to employees or third parties on the construction site
  • Workers compensation claim
  • Claims related to discrimination, harassment or assault
Property Damage InsuranceProvides cover for the construction site and pre-existing structures against unforeseen physical loss or damage.
  • Will generally provide cover for damage caused by Fire, wind, Theft, Lightning, Hail, Explosion, Vandalism, Vehicles
  • Costs for removal of debris
  • Additional costs and expenses for expediting repairs or replacing damaged property
  • Mitigation expenses to suppress further damage
  • Mechanical breakdown
  • Earthquakes
  • Defects or poor workmanship
  • Gradual deterioration of property
  • Damage to property in transit outside of Australia
  • Water damage
  • Employee theft and embezzlement
  • Labour disturbances
Employment Practices Liability InsuranceMinimise the risk and also the possible cost of any claims made against them by their employees.
  • Provides cover for alleged discrimination, unfair dismissal, sexual or workplace harassment
  • Wrongful dismissal or termination of employment
  • Wrongful disciplinary action
  • Covers costs you may be required to pay including damages, legal fees and any back-pay
  • Bodily injury or property damage
  • Employee entitlement
  • Industrial relations
  • Liability of others
  • Unfair employment contract
Decennial Liability InsuranceDesigned to provide protection against any liability for major damage to a building that can occur or become apparent in the decade following its completion. Cover the cost of damages and compensation that may need to be paid to the building owner.
  • Building repairs when fault attributed to insured
  • Material damage within ten-year period
Erection All Risks InsuranceDesigned to protect you against the risk of any loss suffered in relation to the erection and installation of machinery, plant and steel structures.
  • Physical damage to the contract works and any equipment or machinery
  • Any liability for property damage or bodily injury to any third party resulting from the erection and installation

 

  • Losses due to faulty design, defective material or bad workmanship
  • Loss or damage due to wilful act or wilful negligence
  • Consequential loss
  • Losses due to normal wear and tear

Other types of cover you might consider for your project

Contractor’s plant and equipment insurance

This provides cover for the construction equipment found on building sites, which can include everything from hand-held power tools to massive earthmoving equipment and even cranes. Other items covered include forklifts, pavers, concrete equipment, lifting equipment, harvesting machines and farm machinery. This protects you against the damage to or theft of this essential equipment.

Delay in start up insurance

This provides cover for the construction equipment found on building sites, which can include everything from hand-held power tools to massive earthmoving equipment and even cranes. Other items covered include forklifts, pavers, concrete equipment, lifting equipment, harvesting machines and farm machinery. This protects you against the damage to or theft of this essential equipment.

Property and inland marine insurance

Property and inland marine insurance covers a range of aspects of construction. It provides cover for the physical loss of or damage to goods and merchandise while in transit or in storage, while also covering damage to vessels and their machinery anywhere around the globe. Liability cover is also available.

Contractor’s pollution liability

Pollution is a real risk for contractors working on construction sites. Spillage of fuel oil, contaminated soil disposal, the leaking of chemicals or toxic gases, broken pipelines and a range of other factors can cause huge problems. Contractors pollution liability provides protection against a huge variety of pollution risks commonly associated with construction projects.

Contractor’s protective professional indemnity

It might be a mouthful to pronounce, but this type of cover offers professional liability insurance that can be vital for contractors. It protects contractors against losses arising from the neglectful performance of professional services for which the contractor is liable, no matter whether those services were self-performed or subcontracted to someone else. This cover is especially well suited for mid-sized and large construction contractors.

Owner’s protective professional indemnity

If you’re the owner of a construction project, owner’s protective professional indemnity cover helps protect you against losses resulting from the negligence of an architect or engineer. This cover is designed to supplement rather than replace the architect and engineer’s own insurance cover, ensuring a high level of cover is in place.

Architects and engineers liability cover

It’s also essential for design professionals to take out their own insurance cover for protection. Architects and engineers liability cover protects architects and engineers against any loss or liability resulting from errors and omissions in their work. Faulty construction work associated with projects the design professionals work on is usually excluded from this type of cover.

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What won't construction insurance usually cover?

As with any other form of insurance, a range of exclusions will apply to your construction insurance policy. These exclusions can differ from one insurance provider to the next but will commonly include:

  • The total or partial destruction, erasure or corruption of electronic data.
  • The use of the Internet or email that results in a claim.
  • Acts of war or terrorism, invasion, or any claims relating to nuclear weapons material.
  • Any insolvency or bankruptcy of the company must be reported to the insurer. The insurer reserves the right to cancel the policy or alter the terms.
  • Any liability arising out of or in anyway connected with personal injury, property damage or other losses connected to asbestos of any form.
  • Claims related to welding or heating where the insured has failed to comply with laws or safety standards.
  • The demolition of buildings or structures
  • Claims relating to strikes, civil unrest or wilful damage.
  • Excavation work or the removal or weakening of supports
  • Any liability arising out of ownership, use, maintenance, possession or operation on any watercraft or aircraft.
  • The loss of or damage to items such as bills, computer software or cash.
  • Claims relating to actions or incidents occurring outside Australia.
  • Claims arising from dishonest, fraudulent or criminal conduct.
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How much does it cost?

Premiums can be affected by a wide range of factors including:

  • The sum insured. The higher the level of cover you have in place, the more you will have to pay in premiums.
  • Any additional options you select. Adding additional cover to your policy, for example to cover architect’s fees when repairing insured damage, will increase the cost of premiums.
  • The number of people covered. The number of contractors and subcontractors included in the construction project will influence the cost of cover.
  • The work you do. If insurance is taken out on a per-project basis, the size and scope of the construction works will be taken into account. If you take out an annual policy, the insurer will consider the size and scope of the projects you take on and how many you would be expected to complete in a calendar year.
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Do I need construction insurance if I'm an owner builder?

Construction Insurance is also worth considering if you are an owner builder carrying out building works on your own property. While generally not compulsory, it can ensure you do not face severe financial consequences in the event that something goes wrong during the building process and you face additional costs for damage or liability from other parties. Owner builder construction insurance is often available as a package and can provide cover for:

  • Damage or loss of building materials. These are insured against damage from fire, storms, vandalism and also from theft. You can also take out cover for these materials while they are in transit to the construction site or while they are being stored somewhere off site.
  • Damage to existing structures. You’ll definitely need cover for any existing structures that are not part of your planned building project. For example, if you’re building an extension onto your house, chances are that your existing house insurance policy will either be terminated or feature a range of exclusions. Owner builder insurance makes sure you are protected against damage caused to existing structures.
  • Damage caused by vibration. Make sure your policy doesn’t exclude this sort of damage, as vibration from the work you are doing can cause damage to a neighbour’s property and result in significant costs.
  • Public liability claims. This can cover your vacant block of land prior to construction beginning, as well as the building site once construction starts. If a worker is injured on site or you damage someone else’s property, with this type of cover in place you’ll be protected.
  • Workers compensation claims. This ensures you are covered against any legal action taken by contractors or employees.
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steps to Compare Construction Insurance

There are a number of steps you can take and factors you can consider when comparing builder’s risk insurance policies. These include:

  • Determine how long your construction process will take. As builder’s risk insurance policies will cover you for the duration of building from start to finish, estimate how long the building process will take and factor this in when calculating how much each policy will cost.
  • Make sure all the important people are covered. Take the time to sit down and work out which individuals and professionals will be working on the project. Will there be architects, engineers, tradesman, contractors and subcontractors? Construction insurance covers the property owner, the general contractor and some subcontractors, so compare the available policies to make sure you find cover for all the necessary people.
  • Work out a budget. Calculate how much your project is going to cost, including everything from materials to labour. This will then help you determine exactly how much cover you actually need.
  • Specified peril vs all risk policies. Specified peril policies only provide coverage for specific incidents that occur to structures listed on your insurance policy. All risk policies, however, provide coverage for a broader range of events and incidences. Which one is right for you?
  • What additional coverage do you need? Examine the range of insurance options available to determine whether or not you might need to increase your cover. Would a professional indemnity policy be a good idea?
  • Consider your options for the future. When comparing builder’s insurance policies, consider whether each provider will make it easy for you to convert your coverage to a permanent property insurance policy once the job is finished. This can help you save money in the long run.
  • Compare exclusions. As is always the case when buying insurance, it makes good sense to read the policy documents closely and examine what is excluded from your policy. This can prevent any nasty surprises down the line and ensures you cover that you understand.
  • Seek expert advice. Shopping for construction risk insurance can be a daunting and sometimes confusing task. In order to ensure you get the right level of cover put in place, speak to an insurance broker to get professional advice tailored to your specific needs.

How do I make a Claim?

If you need to make a claim on your construction risk insurance policy, check with your insurer for details on the exact claims procedure you must follow. As a general rule you will need to:

  1. Contact your insurer. Get in touch with your insurance provider as soon as possible to notify them of any loss, damage, claim, writ, summons or impending prosecution.
  2. Prevent loss. It’s vital that you take all reasonable steps to minimise your loss, damage or liability, and to prevent any further loss, damage or liability from occurring.
  3. Provide full details. You will need to provide full details of your claim to the insurer within a certain time frame, usually a maximum of 30 days.
  4. Gather evidence. You will need to take all steps possible to preserve anything which may be useful evidence to support your claim.
  5. Inform the police. If any property has been lost, stolen or maliciously damaged, inform the police as soon as possible. Make sure to get a written copy of the police report to support your claim.
  6. Recover and retain. Take reasonable steps to recover any lost or stolen property and hold on to any damaged property so that it can be inspected and assessed by the insurer.
  7. Complete your claim. You must supply the full details of your claim along with supporting evidence to the insurer within a reasonable time frame. It’s also important that you do not make any admission, offer or promise of payment without your insurer’s consent.
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Still not sure? Some final questions you might have

Do I really need construction insurance?

Yes. The list of issues and events that can go wrong on a building site is extensive. Tools and materials can be stolen, property damage can occur and third parties could injure themselves on your site. Having this type of cover in place is essential to your financial wellbeing.

What about public liability cover? Do I really need it?

The chances are that yes, you most probably do need it. You may think the chances of you being sued are unlikely but all it takes is one injury to an employee or damage to a third party’s property to end up causing you significant financial damage. Public liability cover offers vital peace of mind for builders.

How much cover do I need?

This can only be determined by taking a close look at your business and the project. Consider the size and nature of the projects you undertake, where you are located and where you regularly work, the number of people you employ and a range of other factors to better understand the insurance requirements of your business.

How do I choose the right insurer?

Like with any other important business purchase, buying construction insurance requires you to do plenty of research. Compare competing insurers to get an understanding of their reputation, strengths and weaknesses. Some providers specify in offering this type of coverage, while you can also seek advice from other builders to see if they have any tips.

What else can I do to find the right policy?

Obtain quotes from a number of insurance providers and compare several policies at finder.com.au. Read product disclosure statements to learn about each policy’s benefits, options, limits and exclusions, and seek advice from an insurance broker if you need expert assistance.

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