Insuring your building project

Recent events across the country have shown that disaster can strike at any time, with unpredictable consequences. Contract works insurance is one way you can protect your business from the effects of such disasters – here are some of the most important things to be aware of

Contract works insurance is a contractual requirement for most building projects, but it’s a good idea to get it for all of your projects. The policy covers accidental loss or damage to the contract works, such as from theft, vandalism, accidental damage, storm, fire and natural disasters such as floods and earthquakes.

It insures the main contractor and the building owner. It also commonly includes all subcontractors under a single policy. Existing structures on the site are not covered, unless you specifically include them. Make sure you also include any materials being supplied by the owner.

When to take it out?

You should arrange the policy before any work starts, including earthworks and foundations, as it can be difficult to get cover for projects that have already started.

The policy will end on the earliest of:

• The end date on the policy.
• Practical completion of the work.
• Occupation by the owner (which could be temporary or partial).
• If it’s a spec build, when 95% of the build cost has been spent.

Bear in mind that if your project is delayed, arranging an extension to the policy can be more expensive than if you’d simply allowed for extra time from the start (even if you don’t end
up needing it).

Does it meet the requirements specified in your contract?

New Zealand’s most common standard-form building contracts list specific allowances that must be included in contract works insurance, such as for demolition, cost increases and professional fees. Make sure your policy reflects the figures in your contract.

Who pays the excess?

This depends on what it says in your contract. Excesses for damage caused by natural disasters can be substantial in some regions, so make sure you have agreed who is responsible for the excess in these cases.

What’s not covered?

As with any insurance, there are things not intended to be covered by the policy. Some common exclusions within contract works insurance include design and workmanship defects, hydrostatic pressure, damage or loss that occurs after work has ceased on site for a certain period of time, consequential losses, gradually occurring damage or scratched glass.

Builtin is New Zealand’s trade insurance expert. For more information visit www.builtininsurance.co.nz or contact Ben Rickard at ben@builtin.co.nz or 0800 BUILTIN. For information on contract work insurance, visit HERE .