CONTRACT WORKS / CONSTRUCTION INSURANCE

Since 2006, our team has been developing a specialty in the area of Builder’s Contract Works Insurance. We've negotiated keener premiums and looking at ways to offer additional discounts to your construction insurance policy.

WHAT IS CONTRACT WORKS INSURANCE?Cover for theft, malicious damage, weather damage and more Construction Insurance or Contract Works Insurance will cover any building works for loss or damage during construction. It generally covers loss or damage caused by theft, malicious damage, wind, storms, floods, cyclones, landslides or subsidence, fire and earthquake. Cover for while you build If it is built, you need Building Insurance, if it is being built, you need Contract Works Insurance. Our policy has additional benefits Our Builders Contract Works Insurance policy also features many automatic additional benefits that can include cover for spec and display homes. During the period of insurance, your Builder’s Contract Works cover can include alterations and additions to your builds during the course of their erection. Call for a free quote If you’d like to know more about Builder’s Contract Works Insurance, call us for a free no obligation quote where you can ask questions and seek a clearer understanding of how Tradesure’s Construction Insurance may better suit you and your work.

Call us today at Tradesure on 1800 024 799. SAVE SOME OF THE COST OF CONTRACT WORK INSURANCE?Bundle and save 20% The Tradesure team can now offer Subbies and Tradies a 20% standard discount (subject to claims history) on their Builder’s Contract Works Insurance. To be eligible for further discounts, combine your Material Damage and Public Liability sections. Pay by the month helps your cashflow We understand the cost of a one-off annual premium can make a substantial impact on your cashflow and may even require additional financing to cover that fee. The Solution is our Pay by the Month option which is offered to you at no extra cost (applicable to annual policies only). It is a little complex, but we can help, that's why we're here. Contract Works is a complex area of insurance. Put simply, a builder taking out Construction Insurance needs to provide an annual estimate of their turnover (during the time frame of the policy) including the details of the maximum contract amount. At the end of the term of the contract works insurance policy, should the builder’s estimated expenditure be less than expected, a refund is issued. Alternatively, if the estimated expenditure has been exceeded, the builder will be invoiced for the additional costs. Contact us to get a quote Because of the complexities we are unable to give a price indication here without

knowing some detai  ls. But we can get you a price fast just by speaking to us or submitting a quote request on the trade insurance quote form, we can get a pretty firm price to you within an hour.

CONSTRUCTION INSURANCE BROCHURE Tradesure Builders Contract Works Insurance (101 KB)

WHAT OTHER INSURANCE DO YOU NEED TO CONSIDER?

Want piece of mind? Get the right insurance Whether you own a medium to large building company or you operate as a sole trader or you’re involved in a partnership, it’s important to have the correct builders insurance. The right builders insurance will provide you certainty for the future and peace of mind. To find out more about builders insurance contact your Tradesure representative or obtain a trade insurance quote on line. Business insurance – and specifically Tradies business insurance - can be as broad or as defined as you   need. It can be bundled or packaged to include business

insurance products such as general property, public liability, tax audit, income protection, transit and statutory liability. You can also add Tradie specific insurance including tools insurance and work vehicle insurance.

Do you have a business premises? Even a shed or workshop You should also consider Business Property Insurance, which is essentially insurance cover against loss or damage to buildings, contents and stock which might be the result of fire, storm and water. This is particularly important if you work from a shed or you have a workshop. Tradies insurance can also cover theft from your premises and breakage to glass. Ensure your Business Insurance pack that covers all of the above, so ask your Tradesure representative for a trade insurance quote. It is important to talk to us as there are exclusions that need to be considered and we recommend that you discuss these exclusions as well as the inclusions with your Business Insurance consultant. To have your questions answered, talk to us To find out more about tradesman business insurance and to organise a trade insurance quote contact us.

CONTRACT WORKS INSURANCE FOR BUILDERS Contract Works Insurance for builders and owner builders includes cover for loss or damage of building works ( as per the product Disclosure Statements) whether they

be new buildings, renovations or extensions. Public Liability can also be added to this policy and if the contractor has no separate Public Liability policy this inclusion is highly recommended. This insurance gives the builder and the principal (the person or entity that woks is being completed for) cover under the Material Damage section for such occurrences as Fire, Storm, Cyclone, Malicious Damage, Theft of building materials, storm, lightning, flood, water damage, accidental damage & collapse. It is the builders and the principals protection for losses that may occur during the course of the construction.

There are basically two alternatives for this for builders and one choice for owner builders

1/ SINGLE CONTRACT INSURANCE – BUILDERS AND OWNER BUILDERSThis insures one contract that is specified by the builder at one location for a particular entity ( can be the builder for spec home) for a particular time. The normal term for these is 6 months but we recommend insuring the construction for 12 months as the premium is usually the same and it will cover the works if the contract goes over the 6 months standard period. For owner builders they may need to extend for a greater period than a year so it is important that the initial term selected fit with their expectations around how long the construction will take and /or before they occupy the premises. If the builder has no separate public liability then it is important that this be included. This inclusion should be mandatory for Owner/Builders.

2/ ANNUAL CONTRACT WORKS INSURANCEThis is the policy we recommend at it has some distinct advantages. The premium is calculated on your estimated turnover for the coming twelve months. A declaration is sent out prior to the next renewal where the builder needs to disclose all the contracts completed and commenced in that 12 months period. The premium is then adjusted up or down – a refund of premium if turnover overestimated and an additional premium if under estimated. At that time the insurer will require an

estimated turnover for the next 12 months and of course the contractors does not need to include the contracts already commenced in the previous 12 months providing they are included on the annual declaration where they should be included.

Advantages of the Annual Contract Works Insurance is that contracts are automatically insured that have commenced during the term without having to notify the insurer. Premiums for Annual Contractors can be paid at Tradesure monthly at no additional cost (at the time of writing this Tradesure were the only

facility we are aware of who offer this). This also assists with cash flow for the builder as the builder avoids a one off upfront payment. The Annual Contractors insurance includes cover under the Public Liability section for Products Liability as well and we know that this is not always the case with all One – Off Contract Works Insurance policies. Product Liability cover is briefly described as cover for you for claims made against you for personal injury to thir  d parties and

property damage to third parties property caused by the nature, condition or quality of the builders products If the Material Damage section and Public/Products Liability sections are both included we have found a significant saving of premium in comparison with doing One Off Contract Works policies. This can vary, depending on circumstances and insurer underwriting, but up to a 20% saving can be achieved by combining these two sections so it can be substantial particularly when you take into consideration the monthly premiums at no additional charge option.

Please also note that the cover ceases;

1/ when the home is officially handed over or 2/ When the building becomes occupied ( even if not completed or officially handed over). This is when the owner needs to arrange insurance for the home and of course also needs to disclosure to their insurer that the builder has not handed the home over officially.

It is also crucial that when completing insurance for One Off contracts that the insurance is arranged prior to the commencement of the work. Insurers are reluctant to insure dwellings and commercial buildings under a Contract Works Insurance policy if the building has already commenced as it appears that they have some concerns around some builders where a claim has already occurred and then arranged the insurance for the partly completed building in an endeavor to have their claim met. Also and importantly as there is a misconception among some contractors that they may save premium if only insuring the contract for a short period. There is

no saving in premium for this as the premium is based on the contract value and not the length of time the cover is required. So it is very important to insure the contract prior to the commencement of work and insure the contract for 12 months as the premium is most likely the same as any period, which is less.

WHAT IF YOU UNDERINSURE THE CONTRACT VALUE?It is also important to insure for the total contract value as underinsurance penalties apply in the event of claim under the Material Damage section if you select a sum insured less than the contracted amount. As you have no doubt experienced, many contracts exceed the original contract price so it is also important that the increase be advised to the insurer of this as soon as you become aware of the increase. Most policies have an Escalation Allowance available and if this has been selected there will be an automatic increase which is usually shown by a percentage which is usually around 15% of the contract value when included but you would need to check this with your insurer. A few builders, and particularly owner builders, insure for a lesser amount and then increase the sum insured as the building value increases. There is absolutely no point in doing this and it will cost the same as the insurer will calculate the premium on the highest sum insured during the period of the insurance anyway and charge extra for the increase.

DO I NEED TO INSURE THE EXISTING DWELLING IF I AM DOING AN ADDITION OR RENOVATION?

If you are working on an existing dwelling it is also important that the dwelling owner notify their insurer of the work being undertaken and the amount of the work involved. This can not only effect the property damage section of their policy but also

the Public Liability cover for the home owner. The Contractor will still need to insure the value of the works as this will not be covered by the home policy of the owner. If the owners insurance declines to keep the home insured because of the work being undertaken then the contr  actor can and needs to include the home on his Contract Works insurance. We strongly recommend when this needs to be done that the sum insured of the home be selected and advised by the homeowner. Although it is not an

issue for the Builder the homeowner may also need to check if their contents insurance is still covered under these circumstances as their current insurer may cancel the policy in full once this is known.

There are many additional benefits included on Contract Works insurance under the Material Damage section and among these are;

Existing Dwelling – as explained – where the work relates to renovations and/or additional there may be a need to include the existing home under the Contract Works insurance

Contract Value Increase – this additional cover allows automatically for a specified increase in the contract value under completion

Expediting Expenses – where products need to be sourced quickly this covers additional costs un freight and wages

Removal of Debris – This is for clean-up costs after a claim. Once again many Contract Works policies have an allowance for this and we recommend a percentage value of at least 10% of the Contract Price

Professional Fees – when a claim does occur often architects, draughtsman, surveyors and other consultants need to be consulted to assist with the claim

Materials In Storage – off site – materials on site are included in the standard cover automatically but if loss or damage occurs to building materials that were to be used for a particular contract at another site then this should also be included. Some insurers will allow a percentage awhile others may have a specified amount Materials In Transit – this covers building products and materials in transit to your building site. Once again this can be shown as a percentage or a specific amount depending on the insurer.  

Mitigation Expenses – this is the additional cost incurred by the builder in an effort to reduce further loss to the building involved

Fire Extinguishment Costs – This is to cover the cost of extinguishing a fire at the contract site

Contractors Plant, Equipment and Tools – Cover can be included for these but they are restricted o the building site or sites (if annual). Many builders have a separate cover for their tools and equipment as the cover covers them automatically

Australia Wide and not just to the Building site.

Cranes, Hoists, mobile construction machinery – these items are not included generally in the Contractors plant above so need to be specified separately to be insured. Depending on the item once again it may be better to arrange an annual cover for these items if they are owned by the builder.

As with any of these additional benefits it is important to see they are included on your insurance and also to check that all the limits are adequate for the contracts you are involved with and remember these can be changed if where required.

Other considerations;

Licensed tradesman must be used at all times. Faulty Workmanship not insured. Penalties, fines, liquated damages are not covered.

Contact Tradesure for your ‘'Contract Works Insurance’ cover.

WHAT DOES OWNER BUILDER CONTRACT WORKS INSURANCE COVER?What does Owner Builder Contract Works Insurance cover?

1/ Material Damage

This is damage to the building whilst under construction. The most common claims come from cyclone, storm, fire, flood and theft of building materials.

2/ Public Liability This is to protect the owner builder from claims made against them by third parties for damage to property and injury they suffer.

As with all insurances you should consult the relevant Product Disclosure Statement to ascertain the extent of the cover and more importantly what is not covered.

When should Insurance be arranged?

BEFORE YOU COMMENCE BUILDING!!! The biggest Common Mistake Owner Builders mak  e in relation to this insurance is to wait until they have partly completed or commenced construction before arranging this insurance. Owner builders often feel that they will save insurance premium by only insuring the dwelling for a shorter period of time than it takes to build the dwelling. This can be incorrect particularly where the term of the cover is less than 12 months. Additionally some insurers will not cover Contract Works policies once the building has commenced due to strict underwriting guidelines. If cover is difficult to arrange or cannot be arranged because you have already commenced building, this can also have ramifications where finance is involved. Financiers and banks usually as part of their normal lending practice, request a copy of the contract works insurance policy before advancing funds so if this is not in place, the availability of funds could be jeopardised.

How long should I have the policy go for?

As this is done on a Single One – Off contract works insurance policy and no renewal is issued by the insurer, it is best to make the policy run initially for as long as you think it will take to build your home as some insurers are reluctant to extend the policy if the cover is required for a greater time than originally applied for. For

instance if your estimate of the build time is 18 months, then make the policy run for 18 months as normally insurers do not offer renewal for one-off Contract Works cover. The only exception we would recommend for this is that if it will take you less than 12 months to build the home then make the initial period of insurance run for 12 months as there will be no additional premium to pay.

WHAT IF I OCCUPY THE DWELLING BEFORE THE HOME IS FINISHED AND THE CONTRACT WORKS INSURANCE HAS TIME TO RUN?It is most important to understand that once you occupy the dwelling (even if it is not completed) the Contract Works Insurance and the Public Liability associated with the policy will not cover you and you will need to arrange Home Insurance to insure your home. This is another big mistake Owner Builders make – they assume that because they have Contract Works insurance in place it will still cover until the expiry date when in fact this is not the case.

Calculating the sum insured

This is a common question asked by Owner Builders as the value of the construction varies over the build and is obviously is much less at the beginning than at the end. Our advice for this is to have the sum insured represent the replacement value of the finished home and the sum insured should reflect what it would cost a builder to rebuild and/or rectify the damage. This will make sure you are not penalised by underinsurance clauses that exist in Contract Works policies i.e.as an example of this is if you insure a home under construction for $150k and the replacement value is $300k then you will only receive 50% of any claim as you are insured for only half the replacement value. We have also found that when a loss and particularly a major loss occurs, owner builders are happy for a registered builder who is appointed by the insurance company to finish the build and repair the damage. This does not preclude the owner builder completing the work themselves , however, as the insurer is paying for the repa  irs they have the discretion on who they will appoint to do the work. If there is a saving in having the owner builder do the work for the insurer then they may well appoint the owner builder but like a registered builder they would have to quote for the work that is required. Also consider it should take the registered builder less time to complete the work.

What excesses apply in the event of a claim?

This can vary from insurer to insurer but generally we have found the standard excesses are $1,000 per claim for Material Damage and Public Liability. The exceptions to this are Named Cyclone (Tradesure is $2,500) and Workers to Worker claims under the Public Liability section which is also $2500 at Tradesure.

Is there anything I need to know if I engage Subcontractors?

The most important and often overlooked aspect of this is that all subcontractors should have their own Public Liability insurance and show evidence to the owner builder of this by way of a certificate of currency before they commence work. This is a principal adopted by registered builders and it applies no less to owner builders. We strongly recommend you obtain this in writing and not just receive the information verbally. If they have employees of their own they should also have Workers Compensation in place.

All subcontractors should be suitably qualified, licensed and operating as required by

law.

WHAT ADDITIONAL ITEMS ARE INSURED?It can depend on what you select ( and they must be selected as not all are automatically included) and some of these additional items do not add to the cost so we recommend they be included;

Contract Value Increase – can cover up to 15% of the value

Removal of Debris – usually up to 10% of the sum insured

Professional Fees – usually up 15% of the sum insured for draughtsman, architects, surveyors

Fire Extinguishment Costs – usually $10,000

Materials in Transit – usually $10,000

ARE MY TOOLS OR ANY OF MY EQUIPMENT INSURED UNDER THE CONTRACT WORKS POLICY?Any tools you use or plant and equipment you own can be insured. Sometimes these are best covered under the Contract Works Insurance , however, this is not always the case as it can depend on the tools and equipment and where you require them insured. We recommend speaking to an insurance professional to ascertain your insurance needs in relation to these items. Subcontractors tools and equipment are the responsibility of the subcontractor and they should have their own insurance for these items.

What if I employ someone to assist?

If you employ someone to assist you then you should arrange Workers Compensation (Work Cover) insurance for the employee. Even if the worker has their own ABN they could still be deemed to be an employee under current legislation and you would need to check with the Workers Compensation in your state to clarify this.

What are some of the occurrences excluded by Contract Works insurance owner builders should be aware of?

Once again it can vary from insurer to insurer but here are a few examples;

No cover once the building is occupied. No cover for any defect or design error including incorrect plans or specifications. Damage that occurs over time such as corrosion, or deterioration due to climate conditions. Damage caused by vermin, termites or insects.

Contact Tradesure for your 'Contract Works Insurance’ cover.