For the construction industry of today, completing a project looks very different than it did 3 to 4 years ago. As construction demands surge and supply chain challenges persist, the construction industry grapples with rising costs and shortages in trade and labour. With these variations changing the way you complete projects, it is important that your insurance coverages reflect the new risks to be covered. In this blog, we will discuss two key areas that have seen a rapid surge over the past year. If you work in the construction industry and don’t want to fall behind on relevant knowledge, then we highly recommend you read on.
Maximum Construction Period
Whether you’re a builder or tradesperson with a Contract Works insurance policy, the first item to check is your Maximum Construction Period. This is typically set for a specific time such as 12, 18 or 24 months. For single-project policies, the time when cover ends is straightforward. However, annual Contract Works policies will specify a Maximum Construction Period. Depending on your exact policy, this usually means cover for a project starts from the time the contract commences or when physical work begins on a site and finishes either once the Maximum Construction Period has been reached or there is handover of the project (whichever comes first).
This means that even though you may keep renewing your insurance policy if you have passed your selected Maximum Construction Period from when works commenced, it is likely cover has lapsed. It’s important to note the Maximum Construction Period starts ticking from when works commence and renewing the policy does not extend this period. With a build being at its highest value towards the end of construction. It’s certainly not the time you want cover to cease.
It’s essential for the parties involved in the construction project to carefully consider realistic timeframes including any potential delays before setting a Maximum Construction Period, especially when setting an annual Contract Works insurance policy that may cover a number of projects throughout the year.
Limit Any One Contract
This limit also refers to a limit set within a Contract Works insurance policy and refers to the maximum contract value you are insured up to per contract. As the economy continues to evolve, one of the significant challenges faced by the construction industry is the relentless rise in construction costs. Factors such as inflation, increased demand for materials and labour, supply chain disruptions, and fluctuations in energy prices have all contributed to a persistent upward trend. It’s very likely if you set a Limit Any One Contract 3-4 years ago or even last year, this amount is now grossly underinsuring you for your new ‘normal’ maximum contract price.
A lot like the Maximum Construction Period, this is an easy fix and should be reviewed by all parties involved to ensure a correct limit is being set to cover all potential projects throughout the year – and then add a buffer for potential variations. If you think there may be a chance of your project going over the allocated Maximum Construction Period or Limit Any One Contract, contact your insurance provider giving them as much notice as possible to ensure you are adequately covered.
We’re your construction insurance specialists.
Be Covered Insurance Brokers is a trade and construction insurance specialist with industry-specific knowledge and access to multiple insurers allowing us to provide tailored insurance programs to our trades and construction clients. To see how Be Covered Insurance Brokers can help you, contact us at (08) 7092 2242.