What is Contract Works Insurance? 

Contracts Works Insurance has two key sections: the first provides cover for physical loss or damage to the works, and the second covers personal injury or damage to a third party's property. It can also cover tools and equipment owned by the business on and off-site.

This insurance typically covers contractors throughout the job cycle, from preparation at the workshop to on-site construction, then maintenance, testing and commissioning.

Contract Works Insurance can easily be customised to each contractor’s individual needs – from civil, commercial, new building or refurbishment to individual trades such as electrical, plumbing or formwork.

Why is Contract Works Insurance important?

Contract Works Insurance is a package of insurance covers designed specifically for builders and contractors of any size. This insurance can help contractors financially survive if there is an accident or some type of damage to the works during construction, someone is injured, or valuable plant and equipment is lost or damaged. 

Contract Works Insurance is an invaluable way to transfer your larger financial risks to an insurer for a fixed premium, and so minimise your risk. Many head contractors and principals also require builders to have this insurance in place.

What does Contract Works Insurance cover?

Material Loss or Damage - provides cover for physical loss or damage to: 
•    works under construction;
•    materials to be incorporated into the project, either at the site or stored off-site;
•    temporary structures
•    principal’s existing buildings.

Public and Products Liability - provides cover for injuries to other contractors working on the site during the construction (public liability), as well as damage to property which was built or completed once they have left the site (your product). For example, if support for a wall was not built correctly, and the wall collapses a year after the work is finished, then damage to the wall would be covered. 

Plant & Equipment – provides cover for loss, damage or theft of your construction plant, tools and equipment. 

What doesn't it cover?

While Contract Works Insurance is designed to cover loss, damage and accidents, like any insurance policy they will contain exclusions – such as faulty workmanship, materials or design, or any asbestos-related losses. 

So, in the above example with the wall, the cost to rebuild the faulty support would not be insured, only the resulting damage to the wall and clean-up costs. However, if anyone was injured or the surrounding property was damaged, your insurer will pay for these costs and any legal expenses. 

Speak to an insurance expert

Policy wordings and cover differ from insurer to insurer, so it’s important to talk to your insurance adviser.

At Insurance Advisernet, your insurance adviser is a qualified professional and will discuss your business objectives, goals and financial situation to create a risk profile. This will form the basis of their recommendation for the type and amount of insurance and excess so you can make a fully informed decision on your risks and insurance.
 

Frequently Asked Questions

●    What is construction insurance? 

Contract Works Insurance, also known as Construction Insurance, is part of a package of insurance designed specifically for builders and contractors of any size. It covers material loss or damage to the works under construction, materials to be incorporated into the project, and temporary structures. 

The policy usually also covers the builders' or contractors’ tools, plant and equipment against accidental loss, damage or theft.

●    What is public liability insurance? 

Public & Products Liability Insurance for builders provides cover for injuries to other contractors working on the site during the construction (public liability), as well as damage to property which was built or completed once they have left the site.

●    Does a builder need contract works insurance? 

This type of insurance package is standard for the building and construction industry. Many head contractors, principals and financiers require this Contract Works Insurance to be in place before starting on-site. 

This insurance is specifically designed to limit your financial risk relating to personal injury, accidental loss or damage happening on-site. You can also be insured for loss or damage caused by your contractors or subcontractors while working at the site. In addition, once you leave the site, personal injury or property damage arising from the completed works are also covered.

●    How much does contract works insurance cost? 

The cost of taking out Contract Works Insurance varies depending on: 

• the type of work
• whether it is on or near water
• if it involves plumbing, roofing, or a high-rise building
• prior claims
• length of the project
• defects liability period
• total sum insured
• if it is a one-off project or the building is doing these throughout the year. 

Your Insurance Advisernet adviser is a specialist in construction insurance and can work with you to assess your risks and recommend the best solutions, including any insurance cover.

What is Business Interruption Insurance? 

Business interruption, also known as Loss of Profits or Consequential Loss Insurance, is a special insurance cover. It pays the business owner any fixed overheads and similar business costs following a fire, storm damage or other major events that prevent a business from trading. This insurance starts from the time of the fire until the business is back up and running to where it was before the damage occurred.  

Why is Business Interruption Insurance important?

Starting and running a business always carries risks. The key financial risks can be managed by buying insurance cover like Property Damage, Public and Product Liability, and Burglary. 

For businesses of any size, Business Interruption Insurance is essential to ensure that money continues to be received (from the insurer) to pay fixed expenses – such as lighting, power, bank loans, wages, transport, plus net profit related to a reduction in turnover.   

What does Business Interruption Insurance cover?

Business Interruption Insurance compensates business owners for:

• net profit expected to be earned during the time the business takes to get back up and operating to its pre-loss output
• any fixed expenses (interest on loans, wages etc.), that keep on being incurred, regardless of whether the business is operational or not. 

Variable expenses, like input purchases and delivery costs, would not be covered, as they won’t continue if the business isn’t operational and making goods or products. 

The time period for getting the business back up and running to pre-loss levels (plus any expected growth) may take a few weeks or many months, depending on how badly damaged the business was, the loss of customers, and other factors. Working out the maximum time you need insurance for is important – but 12 months is a good place to start.

Choosing your insurance policy

Key factors to consider when choosing the basis of cover, which will impact your premium, include:

• Indemnity period. How long do you need the cover for? Depending on the situation, how long will it take your business to return to pre-loss trading? 
• Payroll. How much of your payroll do you need to insure and for how long? Insurance companies won’t pay employees to sit at home for six months while the business is being rebuilt, but redundancy payments can be insured.
• Growth. Consider the trends in your business: is it growing rapidly, or is it a mature business?
• Economic cycles. Are there any major seasonal fluctuations or economic cycles?
• Suppliers and customers. Do you need to cover specific customers or suppliers that you rely on. If they couldn’t operate, would it impact your business?
• Additional or increased costs of working. Most businesses spend a lot more money in the short term to try and minimise the impact on their business. For outsourcing a valued customer's work to another business for a short while, or if you own a building that’s fire damaged when your business is located, and you need to rent premises for manufacturing, this will be a new additional cost of the rent.

Frequently Asked Questions 

●    How Is It Calculated?

There are two main ways to purchase this type of insurance:

1. Weekly income or Sales
2. Annual gross profit (being 12 months turnover less variable expenses, also insuring net profit).

Does it cover loss of profits for services firms?

For example, solicitors, investment consultants, and medical or dental practices. As many of these businesses can continue to operate from home or serviced offices, gross profits are generally not insured, only additional or increased working costs.

However, businesses that depend on their specific location, such as dentists or allied health, that have their customers in a specific area may consider Gross Profits Insurance. 
 
In Summary

Storms, natural disasters, and fires are regular occurrences in Australia. Major interruption to business, where there is no income for an extended time, is one of the most significant risks a business will face, regardless of its size or industry. A large percentage of businesses that don’t have Business Interruption Insurance never reopen. It’s difficult to pay employees or mortgage costs, suppliers or even the power bill if there is no sales or revenue. 

In addition, trying to get your business back on its feet can be overwhelming – taking management’s focus away from day-to-day business, as well as placing significant financial strain on you and the business.

We can help you find the best cover to keep your business running as smoothly as possible.

What is SME Business Insurance?

Any business in Australia, including small to medium-sized businesses, will benefit from an added layer of financial security in the form of an SME Business Insurance cover. This provides owners and businesses with protection against financial risks and the loss of key assets. It also protects customers, employees, suppliers, and contractors.

Some types of insurance are mandatory, like Workers' Compensation, Professional Indemnity, or CTP Insurance for motor vehicles – these are called statutory insurance covers. Other types of insurance are optional, but they are important ways of reducing business risk and protecting your finances and assets.

What does SME Business Insurance cover?

• Property Damage – cover ranges from fire, storm, lightning and other perils to any type of accidental loss or damage. The property insured includes damage to buildings, contents, stock, plant and equipment, raw materials, and consumer goods.

• Business Interruption – covers weekly amounts or net profit loss and ongoing fixed costs following property loss or damage. Also referred to as Loss of Profits or Consequential Loss Insurance.

• Burglary/Theft - covers break-in at the business premises and the damage is done, as well as theft of goods or stock;
• Money - covers theft of money in various locations (during transit, in a locked safe, or in a private residence) at any time (within and outside business hours). 
• Liability - covers a variety of statutory and civil legal liability, including personal injury and property damage, environmental liability, management liability, statutory liability, professional liability, aviation, marine and motor vehicle-related liability;
• General Property - covers specified portable property against accidental loss or damage once it is taken off the premises, within Australia or overseas; 
• Equipment - covers sudden internal derangement and accidental loss or damage to plant, equipment and machinery, as well as computer and other electronic equipment. Loss of stock and business interruption cover can also be part of this insurance. 
• Motor vehicle & mobile plant – covers registered and unregistered motor vehicles, mobile plant & equipment, farm equipment, construction plant, as well as attachments and trailers. This insurance can also cover loss of income, downtime and hire costs of replacement equipment. 

Speak to an insurance expert

It is our business to understand your objectives, needs, financial situation and risk profile and provide you and your business with tailored risk and insurance advice. 
This is how we work with your business:

1.    We analyse your objectives, needs, financial situation and risk profile to develop appropriate strategies and solutions. 
2.    With your input, we undertake risk assessments and conduct market research to determine the most suitable insurance product(s) for your key risk exposure. 
3.    Your insurance adviser will present appropriate strategies and solutions and also negotiate and place insurance covers agreed.
 

Frequently Asked Questions

• How can insurance help small businesses in Australia? 
  • In Australia, small businesses are encouraged to invest in business insurance to help protect their business from costly eventualities like damage to property and liability claims. Investing in a comprehensive yet affordable insurance policy promotes the continuity of the business in times of losses or great financial trouble. 
• What does SME stand for? 
  Small-to-medium enterprises (SMEs) are businesses whose revenue, number of employees and assets do not exceed a certain threshold. Each country or industry defines a set of criteria to determine whether an organisation falls under the SME category.
• How can insurance help small entrepreneurs or SMEs, or how it relates to risk management? 
  Risk transfer is one of the treatment approaches in managing risks in business, and insurance is an example of risk transfer. It’s a strategy that SMEs employ to shift a risk or a liability from one party to another when that party specialises in managing a specific kind of risk/liability. 
• Why is insurance important for business owners? 
  Getting an insurance policy for your business is important, as it cushions or completely shields you from the hefty costs of certain unforeseen issues (accidents, damages to properties, effects of force), legal claims, and other liabilities. Without insurance, business owners might be forced to foot the bill out of their own pocket.