Help! What construction insurance do I need?
What construction insurance do I need? Understandably this can be a challenge as there is a myriad of cover available in the construction insurance landscape.
Let’s quickly unpack them for you:
5 Construction Insurance Options
Contractors All Risk is the bread and butter of building insurance, this cover provides complete protection for all types of construction and engineering works against different types of construction risks such as fire, lightning, flood, storm, earthquake, cyclone and other accidental or malicious damage. It also provides cover for legal liabilities that may arise from third parties for bodily injury or illness to third parties as well as damage or loss to third party property during your project. Contractors All Risk can be taken out as a once-off policy for a specific project or you can opt to take out an annual policy which covers all your projects for the year – this is typically more economical and less administrative, it also enables you to add cover for your own plant and equipment as well as the plant and equipment that you hire in.
Plant All Risks is what you are after if you are a plant owner or a contractor hiring in plant. This policy provides cover for loss of or damage to construction plant and equipment from any cause whilst in storage, transit, on contract site and being use as a tool of trade. Liability for legal liabilities arising from third parties can also be taken out for plant on-site and plant on-road.
Professional Indemnity is your go to cover for professionals – i.e. Architects, Quantity Surveyors, Engineers, etc. It protects you when someone seeks compensation if you’ve made mistakes or are found to have been negligent. Other construction insurances, like Contractors All Risks, will typically not respond if damages or losses are found to be as a result of professional errors or omissions. In these instances, the affected parties will come knocking on your door seeking compensation and where you want your Professional Indemnity to kick in.
Most contracts require contractors to provide a Construction Guarantee to the owner (or employer) guaranteeing the contractor’s performance undertaken in terms of the construction contract, or principal building agreement (PBA). Building contractors are often required to provide Performance Guarantees after being awarded a contract. Performance Guarantees provide the Employer with security should the Contractor not perform his obligations or complete the work, as agreed, in the construction Contract. Some contracts make provision for the employer to pre-finance a contractor by making payments before the project begins. For example: When the employer agrees to give the contractor money upfront to pay sub-contractors to complete the project. An Advance Payment Guarantee will protect the sub-contractors and the Employer’s investment should the contractor suddenly go bankrupt. A Retention Guarantee is a financial security held by the Employer or main contractor to ensure that sub-contractors fulfill their obligations under the contract. It protects the Employer by guaranteeing that the Contractor will carry out all necessary work to correct structural and/or other defects discovered immediately after completion of the project as well as during the maintenance period. A Bid Bond is purchased when a Contractor is bidding on a tendered Contract. The Bid Bond pre-qualifies the Contractor and provides security to the Employer/Owner by guaranteeing that the Contractor will enter into the Contract if it’s awarded.
Trade Credit is for businesses that deliver goods or services on credit terms. All it takes is just one bad debtor to cripple the entire supply chain. In today’s economy, maintaining cash flow to grow your business can be a difficult balance. Trade credit cover minimises your exposure, equipping you to make the right decisions. Through effective credit management and risk transfer, you will have complete assurance every step of the way.
What construction insurance do I need? I’m still not sure.
Remember, never underestimate the value of advice! Our expert advisers, along with our highly experienced insurance underwriters, are able to discern what your needs are and here to support you as a trusted, reliable partner when you need it most.
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