Building and Construction / Contract Works

What are the key risks in the building and construction industry?

Construction projects involve multiple stakeholders and are often undertaken on challenging sites. Construction businesses must often manage changes to scope or orders, poorly written contracts and specifications and complex project management issues. They may need to deal with labour and materials shortages, or theft of tools and materials. 

Subcontractors and suppliers can provide extra stress for construction firms, as can the rising number of extreme weather events. What’s more, cybercrime is an emerging threat to construction businesses, which often use insecure connections from mobile workplaces, and share files and data with stakeholders outside the business.

“The construction industry generates over $350 billion in revenue, producing around 8% of Australia’s Gross Domestic Product, and has a projected annual growth rate of 2.5% in the next five years.”

– Australian Industry and Skills Committee, Construction, 2020

Who should consider it?

Whether you’re an owner builder, a contractor or a large construction company, you’ll need a range of insurance covers to safeguard your workers, building and equipment.

Did you know?

  • Forty-one percent of construction companies have purchased cyber insurance, while 28% plan to do so in the next 12 months (AON, Global Risk Management Survey 2019 – Construction Industry Insights, 2019)
  • The top three forecast risks for the industry are economic slowdown, cash flow and liquidity risk, and capital availability (AON, Global Risk Management Survey 2019 – Construction Industry Insights, 2019)
  • The top three considerations for construction companies when choosing an insurer are coverage terms and conditions, industry experience and claims service and settlement (AON, Global Risk Management Survey 2019 – Construction Industry Insights, 2019)

What can it cover?

Insurance can protect you and your employees onsite, on the way to work and in your office. It can also protect you financially.

Contract WorksProtects any buildings under construction and construction equipment. This cover may include protection against:

  • natural disasters like fire, earthquake, storm, flood, wind and water damage
  • damage to property caused by defects, theft and malicious damage or vandalism or smashed glass
  • third-party personal injury and property damage.

Business PackSafeguards your business premises against:

  • equipment or machinery breakdown
  • employee dishonesty
  • property or glass damage
  • legal issues, with public and products liability
  • tax audit
  • theft, and theft or loss of money.

Cyber – Safeguards you and your business against expenses and legal costs if your website or other systems are hacked and your system cannot be used or customers’ details are stolen.

Motor InsuranceTakes care of your valuable business vehicles with cover to:

  • help if you or your staff damage another person’s vehicle
  • repair your vehicle after an accident or replace it if it’s written off
  • replace a lost or stolen vehicle
  • safeguard you against legal liability.

Professional Indemnity – Protects you against legal action from a client for breach of professional duty. This type of insurance is often required by building contracts.

Workers’ Compensation – Covers the cost of your employees’ wages, rehabilitation and medication if they become injured or sick through their work.

What usually isn’t covered?

Exclusions, the excess you need to pay and limits of liability can vary greatly depending on your insurer and the requirements of your business.

Case Study

Rick has a small construction business, which employs subcontractors from time to time. As his usual plumber was unavailable for a job renovating a home, Rick employed a plumber recommended from a friend in the building business.

Unfortunately, the plumber did a careless job and a pipe burst overnight, flooding the building and causing extensive damage to the half-completed renovations.

Rick successfully claimed on his contract works, which covered the cost of the labour and materials to rectify the damage.

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