Does construction insurance cover theft of materials that have not been installed yet?

Yes, most contract works insurance policies cover the theft of building materials stored on-site or in transit, provided they are stored securely. This typically includes items such as timber, copper piping and appliances that are waiting to be fitted to the structure.

Are subcontractors automatically covered under a head contractor's construction insurance?

No, subcontractors are generally expected to maintain their own public liability insurance to cover their specific activities and employees. While some head contractor policies may provide limited vicarious liability cover, it is industry standard for every subbie to provide their own certificate of currency before starting work.

Does construction insurance cover damage caused by flooding or storms during the build?

Yes, contract works insurance typically covers physical loss or damage caused by natural disasters including floods, storms and bushfires. However, you should check for specific exclusions related to 'sea rise' or damage caused by leaving a structure unsealed or exposed to the elements during construction.

Does construction insurance pay for the cost of rectifying my own faulty workmanship?

No, standard construction insurance policies exclude the cost of repairing or replacing your own defective work. While the policy may cover 'resultant damage'—which is damage caused to other parts of the property as a consequence of the defect—it will not pay to fix the initial error itself.

Can I get construction insurance if I am an owner-builder?

Yes, you can purchase specific owner-builder insurance that provides public liability and contract works cover for the duration of your project. These policies are tailored for individuals managing their own residential builds rather than professional licensed builders and typically expire once the certificate of occupancy is issued.

Is professional indemnity insurance necessary for builders?

Yes, professional indemnity is essential if you provide design advice, project management services or technical specifications as part of your contract. This covers you against claims of financial loss or injury resulting from a breach of professional duty, which is not typically covered by standard public liability insurance.

Construction Insurance

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Construction insurance (also called contract works) covers physical damage to a build in progress, including theft of stored materials and damage from floods, storms and bushfires.
It won't pay to fix your own faulty workmanship, though resultant damage to other parts of the property is usually covered.
Subcontractors generally need their own public liability cover and aren't automatically protected under a head contractor's policy.
Owner-builders can buy tailored cover for their project, and anyone offering design or project management advice should also consider professional indemnity insurance.

What is construction insurance?

Construction insurance is a type of financial protection that can protect you from the various risks of the industry, including protection for building works against loss or damage, legal liability help if someone tries to sue you and more.

How much is construction insurance?

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.

What does construction insurance cover?

Covered

Legal liability
Loss or damage due to theft, storms, water damage and more
Items the owner supplies to be included in the construction project
Tools, equipment, plant and machinery against on-site and off-site losses

Professional fees when repairing insured damage
Debris removal costs
Damage mitigation expenses
Loss of profits
Loss of rental
Delay in start-up

What does construction insurance not 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:

Not Covered

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.
The demolition of buildings or structures.

Claims related to welding or heating where the insured has failed to comply with laws or safety standards.
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.

Make sure you read the PDS

Finder research shows that around 1 in 4 Australians don't read the PDS. It may be boring but it's worth it in the long run.

What types of construction insurance are there?

Construction insurance encompasses a broad range of different liabilities and finding the right level of cover for your business can be a confusing task. To make sure you're not paying for benefits that you don't need, an insurance broker may be the best way to help tailor a policy to your needs, so take the time to seek expert advice.

To give you an idea of what you can get, the following types of cover are often available with a construction insurance policy:

Public liability

This can cover you for public liability claims made against you including legal costs and expenses for claims made by third parties, claims for physical damage to or destruction of goods in your control as well as claims for third-party injuries or property damage on the construction site (workplace injuries to employees must be covered separately under mandatory workers' compensation).

Property damage

This provides cover for the construction site and pre-existing structures against unforeseen physical loss or damage, including by fire, wind, theft and more.

Equipment insurance

This provides cover for loss or damage to construction equipment found on building sites, which can include everything from handheld power tools to massive earthmoving equipment and even cranes. Other items covered include forklifts, pavers, concrete equipment, lifting equipment, harvesting machines and farm machinery.

Employment practices liability insurance

This provides cover for alleged discrimination, unfair dismissal, sexual or workplace harassment, wrongful dismissal or termination of employment. It can also cover you for costs you may be required to pay including damages, legal fees and any back pay.

Decennial liability insurance

This is designed to provide protection against any liability for major damage to a building that can occur or become apparent in the decade following its completion. It can cover the cost of damages and compensation that may need to be paid to the building owner.

Erection all risks insurance

This is designed to protect you against the risk of any loss suffered in relation to the erection and installation of machinery, plant and steel structures, including physical damage and liability cover.

Delay in start-up insurance

Similar to business interruption, this can cover the loss of the anticipated income in the event that a construction project is delayed because of extreme weather and other events that are out of your control.

As there are a range of different construction projects, there are several more niche types of cover you can get. Some of these include:
- 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.
- Contractors 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.
- Contractors protective professional indemnity. 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.
- Owners protective professional indemnity. If you're the owner of a construction project, owners 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.

How can I compare construction insurance?

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

Determine how long your construction process will take. As builders 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 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 builders 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.

Talk to a broker about a construction insurance package

FAQs

Yes, you can purchase specific owner-builder insurance that provides public liability and contract works cover for the duration of your project. These policies are tailored for individuals managing their own residential builds rather than professional licensed builders and typically expire once the certificate of occupancy is issued.

Finder writers are subject matter experts and use primary sources, in-depth research and interviews with other experts to ensure you're getting accurate, up-to-date information. Articles are fact checked in line with our editorial guidelines.
1. Business.gov.au

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To make sure you get accurate and helpful information, this guide has been edited by Gary Ross Hunter as part of our fact-checking process.

Written by

Tim Bennett

Insurance expert

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A seasoned journalist with over 10 years of experience in news, politics and finance reporting, Tim has previously held roles at the ABC, SBS and Fairfax Media. Tim’s expert insights have been quoted in The Australian, The Daily Telegraph, The Courier Mail and more. He regularly appears on TV and radio, and has been interviewed on 7 News, Sunrise, SBS News, ABC Local, 3AW and 5AA. Tim is passionate about simplifying complex insurance topics for Australian consumers. He holds a Bachelor of Arts (Politics) from Macquarie University and a Tier 1 General Insurance (General Advice) certification, which meets the requirements of ASIC Regulatory Guide 146 (RG146). If you’re interested in a media interview with Tim, please reach out to our PR team at aupr@finder.com. See full bio

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3 Responses

JohnSeptember 27, 2018

We are owner building our farm house at Dalveen Queensland with a construction cost (materials & Labour) of around $250,000 It has timber floors & Windows with cladding exterior & colorbond roof. Single level. We want to cover the building and materials during the construction process against accidental damage including fire, hail, storm etc. would like a quote please.

Finder

JoshuaSeptember 30, 2018Finder

Hi John,

Thanks for getting in touch with finder. I hope all is well with you. :)

To get a quote, you may want to fill out the form found above under the “Receive a Quote for Business Insurance” subheading. Please review the criteria, details of the insurance policy, and its conditions, then contact the insurer directly to discuss your options.

I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.

Have a wonderful day!

Cheers,
Joshua

Finder

JonathanFebruary 21, 2018Finder

Hi Phil,

Thanks for your inquiry.

If you submit your details via the form on the construction insurance page, a business insurance broker will be in touch to discuss the different options available and provide you with a quote on your multilevel apartment complex insurance. This service is provided free of charge and there is absolutely no obligation to sign up for a policy.

As a gentle reminder, please ensure that you read through the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you.

Best,

Jonathan

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Construction Insurance

Construction insurance can protect you from risks with the right policy.