RMA Insurance Brokers
CONSTRUCTION & CONTRACT WORKS INSURANCE

Construction and contract works insurance

Every construction project carries a different mix of physical, contractual and liability exposures. RMA Insurance Brokers helps builders, contractors and developers review construction and contract works insurance around the project type, contract terms, site control and the parties involved.

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Construction and contract works insurance at a glance

Construction and contract works insurance is designed to protect physical works and materials during the construction period. Depending on the arrangement, public liability and other construction exposures may be included in the same package or insured separately, while the building contract helps determine who must arrange cover and whose interests need to be protected.

Depending on the policy, cover can be arranged for residential, commercial or rural projects, with conditions attached to the contract value, project duration, type of works and who controls the site. Limits, exclusions and settlement bases vary between insurers.

Key areas

  • Works in progress & materials
  • Public liability & third-party property damage
  • Construction plant, tools & equipment
  • Existing structures & neighbouring property
  • Escalation & delay-related exposures
  • Contract requirements & principal interests

Who should consider construction and contract works insurance?

Construction and contract works insurance is worth considering for any party with a financial or contractual interest in a building project, whether the works are new, an extension or a renovation.

  • Residential builders and trade contractors
  • Commercial and industrial builders
  • Civil and rural construction contractors
  • Subcontractors with contractual insurance obligations
  • Developers and project principals
  • Owner-builders managing their own project

A review is particularly useful where you:

  • are starting a new project or tendering for one
  • are required to provide evidence of insurance under a contract
  • are renovating or extending an existing structure
  • hire plant or equipment from third parties
  • work on sites with limited access, remote locations or complex logistics
  • have experienced a claim or dispute on a previous project

What can construction and contract works insurance cover?

Works in progress & materials

Cover may respond to physical loss or damage to the structure, works in progress and materials forming part of the contract, subject to the policy wording, limits and exclusions.

The basis of cover can vary between insurers and may be influenced by the type of construction, contract value, project duration and whether the works are new, an extension or a renovation.

Public liability & third-party property damage

Construction activities can create liability exposures for injury to third parties or damage to neighbouring property. Depending on the arrangement, these exposures may be covered under a standalone public liability policy, a contract works policy extension or a combined construction package.

The policy wording should be reviewed to understand whether damage to the works themselves, existing structures or third-party property is covered and under which section.

Construction plant, tools & equipment

Owned, hired-in or borrowed plant, tools and equipment may be insured under a contractors plant and equipment policy or a contract works extension, depending on the insurer and the arrangement.

Hired-in plant can create contractual obligations to indemnify the owner, so the hire agreement and insurance requirements should be checked when arranging cover.

Existing structures & neighbouring property

Renovation, extension and refurbishment projects can expose existing structures and neighbouring property to damage. Some contract works policies can include these exposures by extension, while others require separate cover.

The contract should be reviewed to confirm who is responsible for insuring existing structures and what limits are required.

Escalation & delay-related exposures

Some contract works policies include an escalation allowance where the value of the works increases during the construction period. The amount and conditions vary between insurers.

For some larger projects, specialist delay in start-up or advanced loss of profits cover may be available where delay follows insured physical damage. Ordinary delay costs, penalties and liquidated damages are commonly excluded unless expressly agreed.

Contract requirements & principal interests

Building contracts, head contracts and principal agreements often specify insurance requirements for the parties involved. These can include required limits, parties to be insured or noted, waiver-of-subrogation requirements and particular excess arrangements.

The insurance program should be checked against the contract to confirm it meets the agreed requirements without creating uninsured exposures.

How a construction policy is put together

Construction and contract works insurance is generally arranged around the project details, the contract and the parties involved. The policy structure should reflect who owns the materials, who controls the site and what liabilities each party accepts.

Areas commonly reviewed include:

  • the type, value and duration of the construction works
  • whether the project is new construction, renovation or extension
  • who owns materials before, during and after installation
  • site security, access and storage arrangements
  • existing structures, neighbouring property and third-party exposures
  • plant and equipment ownership, hire arrangements and insurance requirements
  • contractual insurance requirements, limits and additional insured interests
  • excesses, exclusions and conditions for delay, consequential loss and defective workmanship

Insurers treat these areas differently, so the wording and schedule should be reviewed rather than assumed.

Domestic building warranty distinction

Contract works insurance should not be confused with domestic building warranty or home warranty insurance. Where statutory building warranty insurance applies, it is a separate form of cover with different purposes, eligibility requirements and claim triggers.

Where state or territory law requires home warranty, domestic building or equivalent statutory cover for eligible residential building work, that cover is compulsory and is separate from contract works insurance. Thresholds, eligibility requirements, scheme structures and how the cover is obtained vary between jurisdictions.

When should construction and contract works insurance be reviewed?

A review is particularly worthwhile when:

  • you are tendering for or signing a new construction contract
  • the scope, value or duration of a project changes materially
  • you begin using hired-in plant or subcontracting key trades
  • the contract imposes new insurance requirements or higher limits
  • you are working on a renovation, extension or project near existing structures
  • a claim has highlighted a gap in cover, limits or documentation
  • the policy is renewing without reference to current project exposures

Reviewing before the contract is signed gives time to confirm that the insurance program meets the agreed requirements and that no exposures are left uninsured.

What may not be covered?

Construction and contract works insurance is subject to policy conditions, limits, excesses and exclusions. Depending on the policy, cover may be restricted or unavailable for:

  • the cost of correcting defective design, workmanship or materials where excluded under the policy, noting that resulting physical damage may be treated differently depending on the wording
  • wear, tear, gradual deterioration and maintenance issues
  • existing damage or pre-existing defects in structures being renovated
  • loss caused by delay, consequential loss or loss of profit unless specifically covered
  • damage to owned plant, tools or equipment where not insured under the relevant section
  • liability to employees covered by workers compensation legislation
  • fines, penalties, liquidated damages and other delay-related financial losses where excluded under the policy
  • works outside the stated geographical area or project description
  • unapproved variations or works beyond the declared contract value
  • terrorism, war, cyber events and other excluded perils unless expressly covered

This is not a complete list. Cover for residential versus commercial projects, civil works, hazardous activities and principal-arranged insurance differs materially between insurers. The wording, schedule and circumstances determine how the insurance responds.

Example: fire damage during a renovation

Illustrative example

A regional builder is renovating an existing commercial building. During welding work, sparks ignite building materials stored on site, causing fire damage to both the new works and part of the existing structure.

The builder notifies the insurer, documents the damage with photographs and obtains reports from the fire brigade and the project engineer. They also review the contract to confirm insurance responsibilities for the existing structure.

Depending on the policy wording and contract, the contract works insurer may consider damage to the works and materials, while the existing structure may fall under a separate section or policy. Excesses, limits and any principal interests are applied according to the schedule.

Example provided for general illustration only. Cover depends on the insurer, policy wording, limits, exclusions and circumstances of the claim.

Construction insurance across Australia

RMA Insurance Brokers assists builders, contractors and developers across rural, regional and metropolitan Australia with construction and contract works insurance. We help clients review cover whether they are working on residential, commercial, rural or civil projects.

Regional construction can bring additional considerations, including remote site locations, availability of specialist trades and contractors, longer material lead times, severe weather exposure and the difficulty of sourcing replacement plant or materials quickly after a loss.

We also work closely with rma network Livestock & Property Agents, and with the farming families, regional businesses and rural communities they work alongside.

Our services are not limited to rma network Members. Any Australian builder, contractor or developer can contact RMA Insurance Brokers for assistance with construction and contract works insurance.

Why RMA Insurance Brokers?

Construction projects often involve multiple policies, contracts and parties, and the cover arranged at the start may not keep pace as the project evolves. As the scope, value or subcontractor arrangements change, the original insurance may no longer match the risk.

RMA Insurance Brokers can help you:

  • review project details against policy wording, limits and exclusions
  • understand who owns materials and who controls the site at each stage
  • check contractual insurance requirements and additional insured interests
  • coordinate contract works, public liability, plant and workers compensation cover
  • compare options from insurers that understand construction and contract works risks
  • assist with notifications and claims after loss or damage

The insurer remains responsible for determining claim entitlement under the policy.

Frequently asked questions

What is construction and contract works insurance?

Construction and contract works insurance is designed to cover physical loss or damage to works in progress during a construction project. Depending on the policy, this can include the structure being built, temporary works, materials on site, and sometimes materials in transit to the site. It is usually arranged around the specific contract and the risks it creates.

Cover may be arranged for an individual project or, for builders and contractors undertaking ongoing work, under an annual policy, depending on insurer eligibility and the nature of the projects.

Who needs contract works insurance?

Builders, contractors, subcontractors, developers and project principals may all have an interest in contract works insurance. The party responsible for arranging cover is often set out in the building contract, and the right structure depends on who owns the materials, who controls the site and what liabilities each party accepts.

Does contract works insurance cover existing structures?

Existing buildings or structures being altered, extended or renovated are not automatically included under every contract works policy and may need to be specifically insured. Damage to neighbouring property is generally considered separately under the liability section. Both exposures should be identified before work begins.

Are tools and plant covered under contract works insurance?

Contract works insurance is primarily focused on the works themselves and materials. Owned or hired plant, tools and equipment are often insured separately under a contractors plant and equipment policy or a hired-in plant extension. The two covers should be reviewed together to avoid gaps or overlaps.

What is the difference between contract works and public liability insurance?

Contract works insurance covers physical damage to the project, materials and related property. Public liability insurance covers legal liability to third parties for personal injury or property damage arising from the business activities. A construction project usually needs both, and the limits and exclusions in each policy should be coordinated.

Get in touch

Review your construction and contract works insurance

Project scopes, contract terms and site exposures change over time. The cover arranged when the policy was first put in place may no longer reflect the work you are doing today.

RMA Insurance Brokers can help you review whether your construction and contract works insurance still matches the projects you undertake, the contracts you sign and the risks you carry on site.

Request a construction insurance reviewCall 1300 650 254Email us

The information on this page is general information only and does not take into account your objectives, financial situation or needs. Cover is subject to the terms, conditions, limits and exclusions of the relevant policy. Insurance products and available cover vary between insurers. Please review the relevant policy documentation and obtain advice appropriate to your circumstances before making a decision.