Upgrading your qualifications to become a builder is a fantastic achievement and means you can now delve into those larger projects you have always wanted to manage. But with the new qualification comes new responsibility and this can raise some questions regarding insurances.
Below are FIVE questions I commonly get asked by new builders and a brief overview to get you started.
ONE - What is Contract Works Insurance?
Contract works insurance, sometimes referred to as construction insurance, is a very familiar term to builders, it is a common requirement in building contracts and financial institutions usually require it as loan security. But there is no one policy that suits all situations and builders should take particular care when arranging a policy.
Contract Works Insurance policies insure the construction-related activities of a construction project into one package policy, covering the interests of all parties involved in the development. Covered parties include the project owner, general contractor, subcontractors, and in some cases, materials and equipment suppliers.
TWO - What does Contract Works Insurance cover?
Contract Works Insurance covers accidental risks of physical loss or physical damage to the contract works during construction as well as third party liabilities.
Limits under Contract Works Insurance policies are based upon the full estimated contract value. Sub-limits apply to certain coverage extensions, and a specific limit will apply to the Public and Products Liability section.
Public and Products Liability provides protection for amounts you may become legally liable to pay for compensation in respect of third party personal injury or property damage, as a result of an occurrence in connection with your business activities.
Contract Works Insurance is an all-risk policy that is subject to policy conditions.
THREE - Who is responsible for pre existing property cover?
This is a common question asked by Builders and property owners: it is the responsibility of the property owner to effect and maintain insurance on their property, unless the building contract states otherwise.
To avoid any conflict both parties should start by checking the insurance clauses in the building contract. These clauses will clearly set out the obligations of all each party to arrange the various insurance policies needed.
If you find that the contract doesn’t mention insurance for pre-existing property, it will continue to be the property owner’s responsibility just as it was prior to the works due to the fact that the building contract has changed nothing in this regard.
It is a common mistake that builders often assume that the their public liability policy will be sufficient to protect the owner’s property, as this policy covers the builder’s liability for damage to third party property (including the owner’s). The problem with making this assumption is that public liability cover does not directly insure the owner’s property. Public liability only insures the builder’s legal liability and the builders negligence would need to be proven for the policy to respond.
FOUR - Do I need cover for tools and equipment?
Loss or damage to your tools of trade and equipment can delay work until they are replaced. It is wise to consider the cover you have for your tools and equipment. Many policies may exclude tools while they are left onsite or accidental damage. There may be provision on a contract works policy for tools cover but be aware that the owner of the tools needs to be an insured on the policy.
In the event of a claim you may need to provide proof of purchase. A good way to have this on hand is to keep the purchase receipt or photos of the items in case they are stolen.
FIVE - What is Home Warranty Insurance?
Home Warranty Insurance protects consumers from financial loss caused by a builder's failure to rectify or compensate for defective or incomplete residential building work. The conditions vary depending on which state the work is being conducted.
Builders are responsible for taking out Home Warranty Insurance at the time of entering into a building contract with a homeowner.
The extent of cover and requirement varies from state to state and are subject to legislative changes.
In NSW any contract for residential work that is over $20,000 requires Home Warranty to be taken out. This may be lower in some states.
For more information on Home Warranty in NSW visit www.hbcf.nsw.gov.au
““Five by Five is a radio communication that means loud and clear. The radio expression goes back to the 1950’s ‘All right, testing, one, two, three ... Five by Five Mr Holloran’ (Hunter, Blackboard Jungle 1954)””