Do You Need Project-Specific Insurance?

No matter how a project is completed, they all have one thing in common—someone must ensure the project is insured.

Who should buy the insurance?

While not the only coverage options to consider, General Liability and Builder's Risk insurance are the two most common project-specific insurance coverage options. Other coverage options include Boiler and Machinery, Professional Liability, Environmental Impairment Liability, Worker Compensation, Political Risk, and many others.

General Liability (also known as Wrap-Up Liability) is a project-specific liability policy that covers the owner, the general contractor, consultants, and all subcontractors and sub-consultants involved in the project.

Builder's Risk is essentially property insurance that is designed to cover property in the course of construction or renovation.

The insurance is typically secured in one of three ways or a combination:

1. Owner Controlled Insurance Program. The project owner purchases the project-specific insurance to cover their project.
2. Contractor Controlled Insurance Program. The contractor purchases the project-specific insurance.
3. Rely on the contractor and subcontractors to provide the necessary insurance. Commonly used only on smaller projects, the owner relies on the contractor and subcontractors' insurance policies to cover the project.

Note that project insurance can be purchased on a project-by-project basis or blanket program.

Regardless of whether the owner or the contractor purchases the insurance, there are clear advantages to project-specific coverage:

• Covers owner, general contractor, subcontractors, consultants and sub-consultants
• Features dedicated limits / higher limits / broader coverage
• Guaranteed uniform insurance coverage for all contractors and subcontractors
• Coverage is tailored to the specific demands of the project
• Claims settlement is simplified as a control adjuster can often be arranged for the entire project to reduce litigation
• Reduces the possibility of inadequate coverage by sub-trades
• Avoids the risk assumption: "Let's pass it down and see what happens"
• Reduces administration cost of gathering proof of insurance from multiple contractors

Why would the owner purchase the insurance?

• More control over the coverages and deductibles; when the owner purchases the insurance through their broker, they are involved in reviewing coverage and choosing the deductibles they're comfortable with
• Reduces the possibility of gaps in coverage between the owner's insurance program and project-specific insurance
• Eliminates the possibility of the contractor using the insurance as another source of revenue

Why would the contractor purchase the insurance?

• The contractor may be able to take advantage of better rates because of the volume of premiums with their carriers; this may also apply to the owner in some cases
• The contractor and the broker may be more experienced with placing project insurance

To properly insure a project, consider all options and decide which best protects your interest. Work with a broker to understand and effectively manage the risk.

Cowan Insurance Group construction experts can help you make the best selection to meet your needs.