When you’re the owner or a general contractor on a large construction project, protecting your job site and maintaining control over your insurance program are two things that can keep you up at night. Construction risks abound – from natural disasters and theft to environmental liability and accidents. The bigger the construction project, the more risks and players involved – which drives up costs and insurance headaches.
In a traditional model, each entity in a construction project secures its own insurance and then passes those costs on to the project owner in the price of the work. With the multiple tiers of contractors, suppliers and insurance programs in play, it’s not unusual for a $100 million construction project to have $5 million or more in insurance costs. With this model, if your construction site encounters a major loss, sorting out the liabilities and insurance claims can be a nightmare.
A simpler solution
Why not wrap the risks into one easy-to-manage solution? That’s the idea behind wrap-up insurance programs. Wrap-ups are gaining popularity with project owners and general contractors as a way to exert more control over total construction costs and boost overall project safety. The availability of broader coverage, the elimination of duplicate coverage and the resulting cost savings are convincing more owners and general contractors that wrap-ups are a smart option.
A wrap-up policy does exactly what the name implies: It consolidates insurance coverage for multiple general and subcontractors working on a project into one insurance program that’s negotiated, purchased and managed by a single entity. That allows the owner to spread the risk out among different parties and provide a single insurance safety net for everyone involved in the project. The wrap-up can be managed by the owner (owner-controlled insurance program) or the general contractor (contractor-controlled insurance program). The premium is paid by the owner, and in return, all participating contractors reduce their bid prices by the cost of their own insurance.
Construction wrap-ups can provide a broad range of project-specific insurance coverages, including workers’ compensation, employer’s liability, general liability, excess liability, builder’s risk, pollution liability, professional liability and subcontractor default insurance.
Make sure your construction site is protected
Contractors’ insurance policies today have more exclusions and coverage restrictions than ever before. So if you choose a wrap-up policy for your project, make sure it includes Builder’s Risk to cover damage to your structure and materials.
With the skyrocketing costs of raw materials, financing, insurance and litigation in recent years, wrap-up insurance is becoming a more attractive option for project owners and contractors on large construction projects. Wrap-ups are saving them money, providing quality coverage that might not otherwise be available and giving them more control over their insurance coverage and limits.
At Higginbotham, we understand the complexities of today’s construction projects. Let us design a construction insurance program for your construction project – one that will let you sleep at night.