Does Your Construction Insurance Cover All of These Risks?

Construction sites generate a wide variety of risks — not all of them obvious, and not all of them covered by the policies that builders and contractors typically carry. This checklist covers the risk areas most commonly missed or underinsured in construction insurance programs.

The works in progress

• Is the contract sum insured correct? The sum insured under a Contract Works policy should reflect the full contract value including preliminaries, contingencies and any variations likely during the project. Underinsuring the contract value can result in proportional claim reductions under averaging clauses.
• Are materials off-site covered? Prefabricated elements, specialist equipment and materials stored off-site pending delivery may not be automatically covered. Check whether your policy extends to off-site storage locations and what the limit is.
• What is the maintenance period cover? Most Contract Works policies include a defects liability period extension, but cover during this period is usually limited to damage caused by an insured peril — not the cost of rectifying defects that emerge after handover.
• Are subcontractors covered? Check whether your Contract Works policy automatically covers subcontractors’ work, or whether they need to maintain their own CAR cover.

Liability exposures

• Does your liability limit meet contract requirements? Many construction contracts specify minimum liability limits. Check the insurance schedule in your contract — not the general conditions — for the specific requirement.
• Is vibration and removal of support covered? Work near existing structures — excavation, demolition, driven piling — can cause subsidence or cracking to adjacent properties. This is often excluded from standard liability policies or subject to sublimits and specific conditions.
• Are underground services covered? Striking a buried pipe, cable or conduit during excavation is a common and costly liability event. Most policies have conditions around locating services before excavation — check whether your site procedures comply.
• What about contractual liability? Standard liability policies cover your legal liability — but not necessarily liability you’ve assumed by contract beyond what the law would impose. If your contract includes indemnity clauses or hold harmless agreements, discuss with your broker whether these affect your cover.

Plant and equipment

• Is all plant on the schedule? Plant policies cover listed equipment. Equipment acquired during the year or hired in may not be automatically covered or may only receive cover up to an unnamed plant limit.
• Is hired-in plant covered? Your responsibility for hired equipment during the hire period is usually set out in the hire agreement. Check whether your policy covers hired-in plant and whether the conditions match the hire agreement’s requirements.
• Does road risk apply? Plant travelling between sites on public roads may require specific road risk cover that is not automatic under a plant policy.

Professional and design liability

• Do you have design responsibility? If you’re delivering a design-and-construct contract, or if your scope includes any design input — temporary works engineering, shop drawings, value engineering advice — professional indemnity cover is relevant. A Contract Works or public liability policy does not cover professional negligence claims.
• Is your retroactive date current? PI is claims-made — it responds to claims made during the policy period, not when the work was done. The retroactive date should cover all prior work for which you could still face a claim.

Workers and people

• Is your workers compensation declaration accurate? Premium is calculated on wages. If your workforce has grown, you’ve taken on labour hire, or your classification of workers has changed, an inaccurate declaration may cause issues at audit.
• How are contractors and labour hire treated? The rules around who is a worker for workers compensation purposes vary by state. Labour hire workers, deemed workers and certain contractors may be included in your obligation regardless of how they’re engaged.

Environmental and pollution

• Does your liability policy cover pollution? Standard public liability policies exclude or significantly restrict cover for pollution events. For construction involving contaminated sites, fuel storage, hazardous materials or work near waterways, a pollution liability extension or standalone policy may be necessary.

Project-specific and one-off risks

• Are you covered for the specific project type? Some construction activities — work over water, demolition of significant structures, work in live rail corridors — may require specific underwriter approval or specialist cover. If your project involves unusual or high-risk elements, confirm with your broker that cover is in place before work starts.
• Has the principal arranged project-specific insurance? On larger projects, the principal may provide CAR cover for all contractors on the project. If so, understand what’s covered and what you still need to arrange independently.

If you’d like to review your construction insurance against your current projects and contracts, contact WebInsure. We work with specialist construction underwriters and can help you identify any gaps before they become problems on site.

This post provides general information only and does not constitute personal advice. Cover availability, terms, exclusions and premiums vary by insurer, product and individual circumstance. Always review the Product Disclosure Statement and confirm suitability before making a decision.

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