Unpacking Contract Works Insurance for Aussie Builders

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Contract works insurance is a single policy covering construction-related activities and risks for a particular project, or you can opt for an annual plan to cover multiple projects.

When it comes to policy coverage, there’s a lot you can customise to suit your needs.

What contract works insurance covers

Licensed builders – contractors or subcontractors - doing residential or commercial work, as well as owner builders and principal-controlled projects are usually the parties who take out a contract works insurance policy. However, this is not always the case. An insurance broker or advisor can assist in reviewing the terms of the building contract to ascertain whether the head contractor needs to take out cover for subcontractors.

It can also cover the interests of financiers, engineers, architects, project managers and consultants, depending on the policy.

Often, you’ll need this cover as part of the terms of the building contract you’ve signed. A comprehensive contract works insurance generally covers:

Material damage or loss that happens on the building site, including arson, vandalism and theft
Natural disasters such as bushfires, earthquakes, cyclones and flooding
Public and products’ liability for property damage or bodily injury to a third party
Construction collapse
Professional fees
The defects liability period
Removal of debris
Materials the principal builder supplies
Costs to move and store materials from your site if a storm’s approaching, for instance
Expenses that vary or escalate
Inland transit
Search and locate costs.

This may include an agreed period after the work has been handed over, or it may be insured under a separate policy.

You can also tailor the policy to insure plant, equipment and tools, as well as display homes.

Occurrences of loss or damage

A key section to consider is ‘occurrences of loss or damage’. Ideally, minimum coverage should protect you against malicious damage, theft, wind, fire, earthquake, subsidence, landslip, tsunami, storm, flood, plus other water damage.

Check the policy insures you for damage due to defective works – they’re usually excluded.

The insured works

Does your intended policy offer coverage for items or works considered temporary and additional? For example, to protect formwork, falsework, scaffolding, and onsite amenities such as sheds. Check they’re included if you want that coverage.

Please note, building projects involving alteration or renovation aren’t usually included in contract works insurance, but you can opt for extra coverage.

Other exclusions may include are; wear and tear, loss or damage due to faulty design or only realised when doing an inventory. As well, if you give building design advice or services, you’ll need professional indemnity cover. This can help your business if a third party, such as a client, alleges you’ve given them incorrect advice, been negligent or breached your professional duty.

Plant, machinery, equipment, and tools

Construction works insurance is handy because you can take out extra cover for building equipment, tools, plant and machinery left onsite during the build. It will protect you from loss, damage or theft and be up to an agreed sum.

You're covered if an insured event (listed in the dot points above) occurs. You may also insure for off-site losses.

Contracts works insurance is not a standard policy, but one with many options to cater for risk management of your unique business. As your broker, we can guide you in selecting the best fit.

Any financial product advice in this content is provided by cgib AFSL No. 231183. This material is general in nature and has been prepared without taking into account your objectives, financial situation or needs. Accordingly, before acting on it, you should consider its appropriateness to your circumstances. cgib respects your online time and privacy.