The last couple of years have seen unprecedented rises in material and labour costs as well as the need to diversify with products not commonly or previously used to fill crucial gaps in material shortages.
Projects are costing more and taking longer to complete.
If your insurance is not adequately updated to reflect these changes in your project, you may face suffering a hefty loss only to discover you had unwittingly exceeded covers in your Contract Works insurance policy. This may leave you without any or very limited cover, not fully covering the loss you sustained.
As an Adelaide-based insurance brokerage with clients all over Australia and specialising in builder’s insurance, we’ve put together just a few cover points which should definitely be getting your attention and being updated.
Two areas to consider when it comes to your Contract Works insurance is;
- Maximum Contract Value – This is the amount selected in your insurance policy which sets the Maximum Contract Value insurers will cover in the event of a loss. If previously a project cost you $1,000,000 to complete and that same project now costs you $1,150,000 to complete, you could be left $150,000 short in the event of a loss. Depending on your insurer as well, underinsurance may come into play meaning the insurer will penalise you for not insuring for the correct and full Maximum Contract Value and your claim will be reduced even further. It’s important to note, underinsurance reductions come into play whether the claim is a total loss or even just a loss to a smaller portion of the project. If you have underinsured the entire project but only suffer losses to a portion, the insurer can reduce the amount they would have paid out on that smaller portion by the amount you underinsured the entire project. Each insurer differs in how they treat underinsurance but it’s important that you are made fully aware of how underinsurance works on your policy and that the correct values have been set.
- Maximum Construction Period – This is the period you elected would be the maximum time a project would take to complete from commencement through to handover. It’s always highly recommended you give yourself a bit of a buffer here for project or handover delays that can occur. If the maximum a project previously took you to complete was 12 months and this same project now takes you 14 or 18 months to complete, you may find after your elected 12-month period (when the project is at its greatest value!!!) that there is in fact no longer any cover as cover ceased 12 months after the project commenced.
It’s important to note here, a Construction Period and Policy Period are two completely separate items when it comes to insurance. Just because you renewed your policy does not mean that your Construction Period reset, they run as two separate timelines.
These are two simply fixed cover points builders can fix under a Contract Works insurance policy however, unfortunately, we regularly see these two areas being rolled over year after year without proper review or consideration of your changing business. Whether the pandemic has affected your business or not, it’s likely that your business has changed over the last couple of years. We know how hard you work for your money which is why at Be Covered Insurance Brokers we want to make sure the insurance you are paying for, will respond in the event of a claim. Be Covered Insurance Brokers specialises in providing insurance to builders and the construction industry and are the experts in our field!
Be Covered Insurance Brokers also found many other policies were falling short with rising prices including costs of replacing tools and parts affecting most other policies. At Be Covered Insurance Brokers, we provide a holistic approach ensuring all your insurances are kept up-to-date whether this is your Plant & Equipment insurance policy or your Commercial Motor insurance policy and all the covers in between – it is important to regularly review your insurance and make sure they match your current needs and remain competitive in the current market.
If these cover points are not being addressed with you at least yearly, please reach out to Be Covered Insurance Brokers your builder’s insurance and construction insurance specialist and we will be happy to take the time to review your insurance thoroughly to make sure when you need it the most, your insurance program is correct and your not left exposed.