Written by Candice Klau, Managing Director, Be Covered Insurance Brokers
Candice has more than 20 years of insurance broking experience and specialises in construction insurance for builders, developers and trade businesses across Australia.
Moving past $5 million in turnover changes the size of the projects a commercial builder takes on. Warehouses, multilevel residential apartments, office buildings and large commercial fit-outs all carry more contract value, more parties on site and more exposure than the projects that built the business in the first place.
Insurance needs to move with that growth, and it often doesn’t.
Whether you are a commercial builder, civil contractor or construction business scaling into larger projects, your insurance program should reflect the work you are actually tendering for today.
This article looks at three areas that most commonly fall behind as commercial builders scale: contract works cover on bigger builds, liability exposure on multilevel and fit-out projects, and plant and equipment cover as the fleet and subcontractor base grow. It finishes with a practical checklist to work through before your next tender or renewal.
Why Insurance Needs Change as Projects Get Bigger
A policy built around $2 million projects does not automatically scale to a $15 million warehouse or a multilevel residential build.
Contract values, liability limits, the number of subcontractors on site and the insurance clauses written into head contracts all increase with project size. It is also important to make sure your policy covers the types of projects you will be undertaking over the next 12 months, as insurance will only respond to claims for the project types listed on your schedule.
The most common issue we see is not that a builder has no insurance. It is that the insurance was set up for an earlier, smaller version of the business and has not been reviewed since.
Contract Works Insurance on Larger, Multi-Stage Builds
Contract Works Insurance protects the project itself while it is underway, against risks such as fire, storm damage, theft and accidental damage.
On larger builds, the cover limit needs to reflect the full value of the project, not just the original contract price. It also needs to account for variations and cost escalation over a longer build program. A contract that starts at $8 million can grow significantly before practical completion, and your insured value needs to keep pace.
Multi-stage projects add a further layer of complexity. Materials and partially completed works can be spread across several areas of a site or several buildings at once. It is worth checking that your policy responds across every stage of the build, not just the stage that was active when the policy was first arranged.
Key questions to ask before a larger project starts:
- Does the contract works limit reflect the full project value including likely variations?
- Does the policy cover multi-stage builds across the entire site?
- Are materials stored off-site or in transit covered?
- Does the policy period extend to cover the full build program?
Liability Exposure on Multilevel Residential and Commercial Fit-Out Projects
Multilevel residential and commercial fit-out work typically means more subcontractors, more trades and more third parties on site at the same time, including the client’s own staff in occupied buildings.
That raises the chance of a liability claim, and it raises the limits that head contracts often require before you can even tender.
A $10 million or $20 million Public Liability limit is increasingly common on larger commercial and government projects. Builders moving into this type of work for the first time are sometimes surprised to find that the limit they have carried for years is no longer sufficient to meet the contract requirements in front of them.
We regularly see builders discover, mid-claim or mid-tender, that their liability limit was set for a smaller project type than the one they are now bidding on. Checking your liability limit against what current head contracts are actually requiring, rather than what you have always carried, is one of the simplest reviews to do before it becomes a problem.
Questions to consider before tendering for larger commercial work:
- What liability limit does the head contract or principal require?
- Are all business activities and project types correctly disclosed to your insurer?
- Are subcontractors required to hold their own Public Liability Insurance?
- Have any high-risk activities on the project been disclosed?
Plant and Equipment Cover as Your Fleet and Subcontractor Base Grow
Growth usually means more machinery, more hired-in plant and more equipment moving between sites.
It is easy for insurance to fall behind here, particularly when equipment is added for a specific project and the policy schedule is not updated to match. An excavator purchased mid-year, a generator hired in for a specific build, or new tools added to a growing team can all fall through the gaps if the policy is only reviewed at renewal.
If your business has taken on new machinery, started hiring in more plant, or begun operating across more sites or states in the past 12 months, that is a direct trigger to review your Plant and Equipment Insurance, not something to leave until the next renewal date.
Questions to ask when reviewing plant and equipment cover:
- Is all plant and equipment purchased in the past 12 months listed on the policy schedule?
- Are insured values current and reflecting replacement costs?
- Is hired-in plant covered during the hire period?
- Does the policy cover equipment across all sites and states where the business operates?
- Are tools in vehicles covered, and are the policy conditions around unattended vehicles understood?
What to Check Before Signing a Tender or Head Contract
Tenders and head contracts for larger commercial work almost always include specific insurance requirements. A minimum liability limit, a contract works value, a requirement to name the principal as an additional insured, or cross-liability clauses are all common inclusions.
These clauses need to be checked against your actual policy before you sign, not after.
A gap identified before signing is a straightforward fix. The same gap identified after a claim has occurred is a significantly more serious problem.
Before signing any tender or head contract, a specialist construction insurance broker can review the insurance clauses against your current program and identify any gaps or requirements that need to be addressed.
Insurance Checklist for Growing Commercial Builders
Before your next tender, project start or renewal, commercial builders should review:
- Contract works limit reflects the full value of current and upcoming projects, including likely variations
- Liability limit matches what recent head contracts and tenders are actually requiring
- All project types being tendered for are disclosed and covered under the policy
- Plant and equipment schedule includes everything purchased or hired in the last 12 months
- Insured values for plant and equipment reflect current replacement costs
- Hired-in plant cover is included if the business regularly hires equipment
- Cover applies across every state or site the business now operates in
- Insurance clauses in any tender or head contract have been checked against the current policy before signing
- Subcontractors are required to hold their own Public Liability Insurance and Certificates of Currency are being collected
- Policy has been reviewed within the last 12 months, not just carried over at renewal
Frequently Asked Questions
At what point should a commercial builder review their insurance as the business grows?
A review is worth doing whenever project size, contract value or the number of subcontractors on a job increases noticeably, rather than waiting for the next renewal. Purchasing new equipment, tendering for a larger project, moving into a new project type or starting work in a new state are all good triggers for a review.
Does Contract Works Insurance automatically increase with project size?
No. Contract Works cover limits need to be actively set or adjusted to reflect the value of each project. A policy that was appropriate for smaller builds may not provide adequate cover for a larger warehouse or multilevel development unless it is specifically reviewed and updated before the project starts.
What liability limit do commercial builders typically need for larger projects?
This depends on the specific tender or head contract, which will usually state a minimum required limit. Builders moving into larger commercial work should check contract requirements against their current liability limit before tendering, as requirements for commercial, civil and government projects are often significantly higher than what smaller residential or trade work required.
Do subcontractors need their own insurance on larger commercial builds?
In most cases, yes. Subcontractors are typically required under contract to hold their own Public Liability Insurance and, depending on their trade and scope, Professional Indemnity Insurance.
Collecting current Certificates of Currency from all subcontractors before they commence work is considered best practice and a sound risk management step.
How often should plant and equipment cover be reviewed as a business scales?
Plant and equipment cover should be reviewed whenever new machinery is purchased, when hired-in plant use increases, or when equipment is being used or stored across new locations or states. Waiting until renewal can leave newly added equipment uninsured or underinsured for the period between purchase and the next review.
Speak With a Specialist Construction Insurance Broker
If you are tendering for larger projects or your business has grown in the past year, it is worth checking that your contract works, liability and plant and equipment cover have kept pace with where the business is today.
At Be Covered Insurance Brokers, we work with commercial builders, civil contractors and construction businesses across Australia to structure insurance programs around the projects, contracts and risks that matter to their business.
Speak with the team at Be Covered to review your construction insurance program before your next tender or project start.
General information only: This article provides general information and does not take into account your specific business, projects, contracts or insurance needs. You should seek advice from a qualified insurance broker before making decisions about your insurance.
