For most construction businesses, it is second nature to ensure all your physical assets (assets you can see and touch) plus any insurances required contractually like Liability insurance or Professional Indemnity insurance – however when it comes to one of your largest assets being your debtors ledger, this is usually left uninsured.
When we think about insolvency and insurance, there are 3 common insurance products we discuss with our clients and the benefits and pitfalls of each;
Management Liability insurance
Management Liability insurance provides cover for directors and officers against legal liability that they may incur personally in managing a corporation and also extends to the corporation itself for certain types of claims. Although these days, there tends to be immediate insolvency exclusions applied for any risk relating to the construction industry to exclude cover for claims and/or loss that arise from and/or related to, the insolvency of an organisation. Insurers have been applying this exclusion due to the large exposure facing the construction industry from this risk and therefore, the large exposure facing the insurers themselves to cover the costs of these claims.
Although insolvency exclusions are fairly common and unlikely to be removed for those businesses involved in the construction industry, they do differ greatly in their wording and therefore the scope of cover provided.
Trade Credit insurance
Most robust approach assisting business to safeguard their balance sheet to provide peace of mind while you grow the business. There are many insurers out there providing Trade Credit insurance however the scope of cover, types of clients they can provide cover to and premiums range wildly. Some insurers also do provide additional support and services to assist in your own internal risk management procedures and systems.
Legal Expenses insurance
Legal Expenses insurance provides advice and cover for the legal costs of pursuing or defending certain types of legal action. These may include:
- Payment disputes
- Allegations of not complying with a contract
- Contract disputes
- Unfair allegations of faulty workmanship
- Breach of contract
- Debt Recovery
Disputes can arise from;
- Builder / Subcontractor / Tradie
- Property Owner
It is important to note that many Legal Expenses insurance policies automatically exclude cover for contractual disputes however a construction insurance specialist can assist you with navigating the different products and cover types available.
What Can Be Covered Do for You?
Not all policies provide the critical covers required for the specific circumstances of the construction industry. Many policies include construction specific exclusions or are missing important extension of cover that your business needs. As a specialist construction and building insurance broker, we work with our clients to tailor an insurance program that suits your individual needs and budget.