Contract Works Insurance (Part 2)

Mind the gap! – between practical completion of a build and getting a consent completion certificate (CCC)

Homeowners or builders – if they are contracted to do so – should prioritise getting a CCC. Delays can affect the owner’s ability to arrange house insurance and, if something happens to the house in the period between practical completion and a CCC being issued, builders can be liable.

A contract works policy will generally expire on the EARLIER of:

• the policy end date; or
• practical completion; or
• when the owners start using the building; or
• if it’s a spec, when 95% of the budget is spent.

Some house insurers will only insure a property that has a CCC. As there is often a delay between the time the property is practically complete and the date a CCC is issued (for example, if the owner needs to complete landscaping) houses can be left uninsured for a period of time.

It is important to make clients aware they must arrange house insurance from the point of practical completion.

Early birds get the worm

Builders should always arrange contract works insurance before starting any build work. Banks could withhold finance needed to complete a project if insurance is not in place.

Because the cost of a claim towards the end of a project is higher than the cost at the start, insurers are reluctant to provide cover after work has started. The value of what’s on site increases over time and insurers don’t like being asked to only insure the riskiest period of the build.

Insurers will require lots of extra information before agreeing to provide cover and the cost may be higher than if it was arranged before the build started. In some cases, they may even decline to provide cover, which can complicate finance arrangements.

SOLUTION: Arrange contract works insurance BEFORE you start building!

About Builtin New Zealand

Builtin New Zealand is a specialist in insurance for the construction industry. For more information visit www.builtin.co.nz/Insurance, email Ben Rickard at ben@builtin.co.nz or call him on (07) 579 6259 or 0275 212 014.